Annual Results & Publication of Annual Report

RNS Number : 2746E

PPHE Hotel Group Limited

27 February 2020

PPHE HOTEL GROUP LIMITED
("PPHE Hotel Group, "the Group" or the "Company")

Audited Annual Results for the financial year ended 31 December 2019
Publication of Annual Report & Accounts and Notice of Annual General Meeting

Good growth in revenue and profits and
completion of more than £100 million multi-year real estate investment programme

PPHE Hotel Group, which together with its subsidiaries (the "Group") is an international hospitality real estate group, is pleased to announce its audited annual results for the financial year ended 31 December 2019.

Financial summary

· Like-for-like¹ revenue increased by 5.2% to £355.8 million, as the Group continued to benefit from recently completed £100 million plus real estate investment programme

· Like-for-like¹ EBITDA improved by 3.4% to £117.4 million. Reported EBITDA increased by 8.6% to £122.9 million, driven by an increased average room rate, leading to RevPAR growth. It was also supported by the IFRS 16 changes on accounting for leases

· Normalised profit before tax increased by 7.9% to £40.7 million (2018: £37.7 million)

· In 2018 reported profit before tax benefited from a one-off revaluation resulting in a 2019 reported profit before tax decrease to £38.5 million (2018: £46.4 million) and reported basic/diluted earnings per share decrease to 80 pence (2018: 90 pence)

· Proposed final dividend of 20 pence per share (2018: 19 pence per share), bringing the total dividend for the year to 37 pence per share (including the interim ordinary dividend of 17 pence per share), an increase of 5.7%

· Real estate assets independently valued at £1.7 billion by Savills and Zagreb nekretnine Ltd, in summer 2019

· EPRA NAV per share was up 3.6% at £25.46 (2018: 24.57)

· Adjusted EPRA earnings per share were up 11.7% to 128 pence, reconfirming the value created through strategic focus, the Group's owner operator model and in-house development expertise

· Total shareholder return of 13.8% in 2019*

*source: Bloomberg TSR for the year ended 31 December 2019

Operational and corporate highlights

· Financial performance reflected in an increase in key operating metrics, with like-for-like¹ RevPAR up 5.1% year-on- year

· Completion of more than £100 million multi-year investment programme to reposition and upgrade properties in the United Kingdom, the Netherlands and Croatia

· Holmes Hotel London, Park Plaza Vondelpark, Amsterdam and Park Plaza Utrecht fully repositioned and are well received by guests

· Completion of phase one repositioning of Arena Kažela Campsite in Croatia ahead of the 2019 summer season

· Site works progressed for the Group's 100% owned art'otel london hoxton and works are underway at art'otel london battersea power station, which will be managed by the Group on completion

· Entry into the USA, through the acquisition of a site in New York City with the intention of developing an art'otel branded hotel, the first outside of Europe

· The Group's Croatian subsidiary, Arena Hospitality Group ("Arena"), agreed to acquire the 88 Rooms Hotel in Belgrade, Serbia

· Acquisition of site near London Waterloo Station with a view to develop a hotel, subject to obtaining planning consent

· Significant and important corporate milestone in the year was the Group's inclusion in the
FTSE 250 and FTSE All Share Indices (June 2019)

Post period end

· Arena acquired leasehold for a site in Zagreb, Croatia, to develop and operate a 115 room hotel

· The Group acquired full ownership of the site in New York City, which is earmarked for an art'otel development

Commenting on the results, Boris Ivesha, President and Chief Executive Officer, PPHE Hotel Group said:

"Our 2019 financial results coupled with our strategic progress once again demonstrate the strength of our unique business model, the appeal of our hospitality real estate portfolio and our rigorous focus on performance. Over the last three years we completed more than £100 million asset upgrade investment projects, the continued benefit of which is being reflected in our financial performance and a significantly enhanced guest experience.

"Whilst we are closely monitoring the current uncertain macro environmental developments related to the Coronavirus outbreak and its impact on travel patterns, trading for the two months in 2020 for our Group has been in line with the Board's expectations.

"Our longer term outlook focuses on growth delivery through our well invested portfolio, the delivery of our more than £300 million development pipeline of new properties in London, New York and Eastern Europe and additional acquisition opportunities."

Key financial statistics

	Reported in GBP (£)		Like-for-like GBP¹ (£)
	Year ended 31 December 2019	Year ended 31 December 2018	Year ended 31 December 2019	Year ended 31 December 2018
Total revenue	£357.7 million	£341.5 million	£355.8 million	£338.3 million
EBITDAR	£124.7 million	£120.7 million	£124.2 million	£120.3 million
EBITDA	£122.9 million	£113.2 million	£117.4 million	£113.6 million
EBITDA margin	34.4%	33.1%	33.0%	33.6%
Reported PBT	£38.5 million	£46.4 million	-	-
Normalised PBT	£40.7 million	£37.7 million	-	-
Reported EPS	80p	90p	-	-
Dividend per share	37p	35p	-	-
Occupancy	80.6%	79.4%	80.7%	79.4%
Average room rate	£128.5	£123.1	£128.5	£124.3
RevPAR	£103.6	£97.7	£103.7	£98.7
Room revenue	£250.6 million	£236.6 million	£249.1 million	£234.3 million
EPRA NAV per share	£25.46	£24.57	-	-
Adjusted EPRA earnings per share	128p	115p	-	-

¹ The like-for-like comparison for 2019 excludes the influence of IFRS 16, which was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019. Furthermore, the like-for-like figures for the year ended December 2019 exclude the operation of Park Plaza Vondelpark, Amsterdam from August to December (the property was temporarily closed for renovations during this period in 2018). The like-for-like figures for the year ended December 2018 exclude the first three months of operation for Park Plaza Vondelpark, Amsterdam (the property was temporarily closed for renovations during this period in 2019). Furthermore, the like-for-like figures for the year ended December 2018 exclude the operation of art'otel Dresden (the lease of which was terminated on 31 July 2018).

Publication of Annual Report & Accounts and Notice of Annual General Meeting

PPHE Hotel Group Limited will publish later today its annual report and accounts for the financial year ended 31 December 2019 (the "Annual Report"), including the Notice of Annual General Meeting. These documents shall be available today on the Company's website www.pphe.com .

The Company's Annual General Meeting will be held on 19 May 2020 at 12 noon at 1^st Floor, Elizabeth House, Les Ruettes Brayes, St Peter Port, Guernsey GY1 1EW.

Pursuant to UK Listing Rule 9.6.1, copies of the Annual Report and Notice of the Annual General Meeting shall be submitted later today to the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/nsm

In accordance with Disclosure Guidance and Transparency Rule 6.3.5, the information in the attached Appendix consisting of a Directors' Responsibility Statement, principal risks and uncertainties and related party transactions has been extracted unedited from the Annual Report & Accounts for the financial year ended 31 December 2019. This material is not a substitute for reading the full Annual Report.

This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of the company is Daniel Kos, Chief Financial Officer & Executive Director.

Enquiries:

PPHE Hotel Group Limited
Daniel Kos, Chief Financial Officer & Executive Director
Robert Henke Executive Vice President of Commercial Affairs	Tel: +31 (0)20 717 8600
Hudson Sandler
Wendy Baker / Lucy Wollam	Tel: +44 (0)20 7796 4133 Email: pphe@hudsonsandler.com

Notes to Editors

PPHE Hotel Group is an international hospitality real estate company, with a £1.7 billion portfolio, valued as at summer of 2019 by Savills and Zagreb nekretnine Ltd (ZANE), of primarily prime freehold and long leasehold assets in Europe.

Through its subsidiaries, jointly controlled entities and associates it owns, co-owns, develops, leases, operates and franchises hospitality real estate. Its primary focus is full-service upscale, upper upscale and lifestyle hotels in major gateway cities and regional centres, as well as hotel, resort and campsite properties in select resort destinations.

PPHE Hotel Group benefits from having an exclusive and perpetual licence from the Radisson Hotel Group, one of the world's largest hotel groups, to develop and operate Park Plaza® branded hotels and resorts in Europe, the Middle East and Africa. In addition, PPHE Hotel Group wholly owns, and operates under, the art'otel® brand and its Croatian subsidiary owns, and operates under, the Arena Hotels & Apartments® and Arena Campsites® brands.

PPHE Hotel Group is one of the largest owner/operators of hotels in central London and its property portfolio comprises of 37 hotels and resorts in operation, offering a total of approximately 8,800 rooms and eight campsites, offering approximately 6,000 units. PPHE Hotel Group's development pipeline include new hotels in London, New York City, Belgrade and Zagreb which are expected to add more than 800 rooms to the portfolio by the end of 2023.

PPHE Hotel Group is a Guernsey registered company with shares listed on the London Stock Exchange and a constituent of the FTSE 250. PPHE Hotel Group also holds a controlling ownership interest in Arena Hospitality Group, whose shares are listed on the Prime market of the Zagreb Stock Exchange.

Company websites

www.pphe.com
www.arenahospitalitygroup.com

For reservations

www.parkplaza.com
www.artotels.com
www.arenahotels.com
www.arenacampsites.com

Forward-looking statements

This announcement may contain certain "forward-looking statements" which reflect the Company's and/or the Directors' current views with respect to financial performance, business strategy and future plans, both with respect to the Group and the sectors and industries in which the Group operates. Statements which include the words "expects", "intends", "plans", "believes", "projects", "anticipates", "will", "targets", "aims", "may", "would", "could", "continue" and similar statements are of a future or forward-looking nature. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Group's actual results to differ materially from those indicated in these statements. Any forward-looking statements in this announcement reflect the Group's current views with respect to future events and are subject to risks, uncertainties and assumptions relating to the Group's operations, results of operations and growth strategy. These forward-looking statements speak only as of the date of this announcement. Subject to any legal or regulatory obligations, the Company undertakes no obligation publicly to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All subsequent written and oral forward-looking statements attributable to the Group or individuals acting on behalf of the Group are expressly qualified in their entirety by this paragraph. Nothing in this announcement should be considered as a profit forecast.

CHAIRMAN'S STATEMENT

Thirty years in the making

Thirty years ago the foundations of the Company were formed with the opening of our first hotel in Eindhoven, the Netherlands in 1989. It is a proud moment for me personally and a credit to the expertise and dedication of the entire team that the Group has consistently grown over the last three decades. Today, the Group has an international property portfolio of 45 hotels, resorts and campsites in operation, predominately trading under the brands of Park Plaza and art'otel, as well as an exciting £300 million plus development pipeline for future growth.

The quality of our property portfolio was confirmed in an independent valuation by Savills and Zagreb Nekretnine Ltd (ZANE) in summer 2019 at £1.7 billion, translating to NAV per share of £25.46.

Delivering for shareholders

In 2019, we continued to make financial progress with like-for-like revenue and EBITDA up 5.2% and 3.4% respectively.

We have continued to deliver strong returns for shareholders, achieving a Total Shareholder Return of 13.8% for the year^*.

A further important milestone in the Company's evolution was reached in 2019 with the Group's inclusion in the FTSE 250 Index. As we continue to grow in size and stature, we recognise the need to further strengthen our financial reporting, corporate communications and our governance, whilst staying true to our entrepreneurial roots.

*source: Bloomberg TSR for the year ended 31 December 2019

Our approach

As an owner operator with extensive development expertise we take a different approach to many of the large global hotel companies, by choosing to operate across the whole value chain.

Our key sources of value emanate from our real estate and hospitality expertise, our access to global brands and distribution systems, our passionate and highly-trained people and our proven financial strength, combined with our ability to secure capital.

As established hospitality operators we are always aiming for operational excellence. We are continuously seeking out and evaluating new property opportunities, as well as refurbishing and repositioning our existing assets. With our expertise in development we are able to marry this with the aspirations to create new opportunities. Our owner operator business model enables us to enhance value through driving the business and gives us greater scope to maintain all our assets to the level required to achieve our aspirations of maximising operational revenue. Furthermore, we have the asset backing to refinance and recycle capital to fund further investments and facilitate future growth.

We own most of the properties we operate, which gives us greater control over our investment strategy, the quality of our products and our operations.

Control enables us to make swift investment decisions and seize opportunities as they arise, as well as capturing all of the economic upside. By regularly investing in our existing diverse portfolio we maintain a high quality estate which increases the value of our portfolio of assets, inspires our team members, and enables us to delight our guests every day with excellent guest experiences.

Responsible Business

Our sustainable business strategy is focused on our people, our places and our planet. Since launching our Responsible Business programme two years ago, we have been embedding this ethos into our culture and aligning it to our business strategy. We aim to have a target-based sustainable approach and have embed this at all levels across the Group.

We understand that the way we do business can have a significant impact on our communities and the world around us and that all of us have an increased level of responsibility in this area. In recognition of this, we have assembled a dedicated team to review our activities and refine our Environment, Social and Governance (ESG) frameworks. We have set up a programme to appoint a Responsible Business Ambassador from every property in our portfolio to promote and enhance our efforts across our estate.

Governance in action

High standards of governance are essential to creating long-term value for all of our stakeholders. We are committed to upscaling our corporate governance and sustainability programmes and recognise their increasing importance to our business. As part of our ongoing succession planning programme we promoted two senior company executives into key leadership positions, while also refreshing the Board with the appointment of two independent Non-Executive Directors in September 2019 and February 2020 respectively.

We were delighted to welcome Ken Bradley to the Board as an independent Non-Executive Director on 4 September 2019. Ken, who is a former Chief Country Officer of both RBSI and Barclays Bank, is a member of the Audit Committee, the Nomination Committee and the Remuneration Committee.

We have listened to the views of shareholders and delivered on our commitment to appoint a further independent Non-Executive Director. Post the year end, Nigel Keen has been appointed to the role. Nigel has over 30 years' property expertise with leading blue chip companies and an established track record as a Non-Executive Director with companies including FTSE 250 constituent Vistry Group.

Following Nigel Jones retiring, following the forthcoming Annual General Meeting, the Board will include three independent Non-Executive Directors.

As previously announced, Kevin McAuliffe's membership of the Audit Committee came to an end at the Annual General Meeting in May 2019 and in November 2019 he stepped down from the Remuneration Committee after a transitional period.

Improving our transparency and reporting standards is part of our journey as a Company. We are actively working on creating greater transparency in our governance activities, as this report will illuminate.

For more see governance page 90 of the Annual Report and Accounts 2019.

Diversity

The Board is committed to promoting diversity. As this was our first year in the FTSE 250, we now take part in the Hampton-Alexander Review. Our leadership, which includes the direct reports to the Chief Executive Officer and their direct reports currently consists of 48% women and 52% men. This is well ahead of the 33% target and 27.9% achieved by the FTSE 250.

Dividend

The Board is proposing a final dividend payment of 20 pence per share, bringing the total ordinary dividend for the year ended 31 December 2019 to 37 pence per share, representing a year-on-year increase of 5.7%.

This is in line with our progressive dividend policy and reflects the Board's confidence in the Group's operations, assets and prospects.

Current trading and outlook

Trading in 2020 has started well and in line with the Board's expectations, as we continue to capitalise on recent investment programmes to reposition properties in the UK, the Netherlands and Croatia. In the coming year, we will continue to ensure we have an attractive and well-invested estate which delivers memorable experiences for our guests and returns for our shareholders.

We remain vigilant to ongoing macro and geopolitical uncertainty and its potential impact on travel patterns, however the Board believe that recent investments across the estate and a balanced £300 million plus development pipeline spanning the UK, Europe and the US, combined with a strong balance sheet means the Group is well positioned for future growth.

We will also continue to consider asset acquisitions that align with our strategic aims and deliver our target returns on investment.

I would like to take this opportunity to thank the members of the Board for their guidance. Additionally, I would like to thank all our team members for their hard work and commitment during 2019.

I am confident that PPHE Hotel Group can continue to create and deliver value for all our stakeholders in 2020 and beyond.

Eli Papouchado

Chairman

PRESIDENT & CHIEF EXECUTIVE OFFICER'S STATEMENT

Our 2019 financial results coupled with our strategic progress once again demonstrate the strength of our business model, the appeal of our hospitality real estate portfolio and our rigorous focus on performance, in what has been a year characterised by high levels of geopolitical uncertainty.

2019 at a glance

Strategic progress

We demonstrated our real estate expertise in the year, completing over £100 million of asset upgrade projects over the last three years. The significant repositioning of Holmes Hotel London (formerly known as Park Plaza Sherlock Holmes London), Park Plaza Vondelpark, Amsterdam and Park Plaza Utrecht were completed and relaunched. In Croatia, we finished the first phase of our plans to transform Arena Kažela Campsite into an upscale camping offer.

These projects have all been completed, and the rooms are now contributing to Group revenue. As trading in these reopened properties continues to build, we are pleased with their performance.

We have also expanded our pipeline of new hotels and projects, extending our footprint into the USA and Serbia, and added to our strong presence in London. The site in New York City has been acquired with the intention of developing an art'otel branded hotel. Our Croatian subsidiary, Arena Hospitality Group ('Arena') entered into an agreement to acquire an 88-room, 4-star hotel in Belgrade, Serbia and, post the period end, Arena entered into a 45-year lease for the development and operation of a 115-room hotel in Zagreb, Croatia. These agreements are in line with Arena's strategy to expand its presence in the Central Eastern European region and reduce seasonal exposure.

In London, the Group acquired a freehold site on the South Bank, with a view to developing a hotel (subject to planning).

Further details on our progress are set out in the Business Review below, and additional details of our investment programmes and development projects can be found on pages 32 to 35 of the Annual Report and Accounts 2019.

Financial delivery

It is testament to the team that we delivered another year of growth in revenue and profit.

The Group delivered like-for-like revenue up 5.2% to £355.8 million, like-for-like EBITDA growth of 3.4% to £117.4 million, and maintained like-for-like EBITDA margin at 33.0%. The ordinary dividend for the full year increasing 5.7% to 37p per share.

This performance reflected an increase in our key operating metrics, with RevPAR growth of 6.0% to £103.6, driven by a 120 bps improvement in occupancy and 4.4% growth in average room rate. RevPAR growth was achieved in certain regions, with the United Kingdom and the Netherlands the stand-out performers, achieving growth of 7.4% and 2.5% respectively. Both the United Kingdom and the Netherlands benefited from our 2017 and 2018 openings and the completion of repositioning projects.

The annual independent revaluation exercise on our property assets was carried out by Savills and ZANE and valued our portfolio at £1.7 billion (as at 30 June 2019), an increase of 5% year-on-year. EPRA NAV per share increased by 3.6% at £25.46 per share (as at 31 December 2019), adversely impacted by the strengthening of Sterling. The adjusted EPRA earnings per share were up 11.7% to 128 pence.

Full details of the financial performance are set out in the Chief Financial Officer's Review below.

Key corporate milestone

We achieved a key goal with the Company's inclusion in the FTSE 250 and FTSE All Share Indices. This marked a significant milestone in our corporate journey, proving the success of our recent corporate activity, which has been focused on providing the Group with the appropriate platform to engage with a wider potential investor base and improve liquidity.

The foundations of our success

Controlling the value chain

The Group's strength is centred on our expertise in both real estate development and hospitality operations, built up over the last 30 years. This dual approach gives us the flexibility and control to invest in our hospitality operation and manage our assets to create maximum value for all our stakeholders; team members, investors, guests, local communities, affiliates and suppliers.

Property expertise

In addition to the considerable property and development expertise on the Board, we have a dedicated in-house capability spanning development and technical services. We have the in-house expertise to take projects from conception through to operation.

The team takes a disciplined and focused approach to asset management and identify opportunities to deploy capital to optimise the value in our existing portfolio, acquire further assets to drive growth and, where appropriate, extract value to fund longer-term sustainable growth.

In our hospitality operations, we are focused on achieving operational excellence. We are continually trying to identify better ways of working, while also looking at how we can raise the already high levels of service for our guests.

Our high Guest Rating Scores and healthy profit margins prove that the two are interrelated.

Radisson Hotel Group partnership - global distribution and access to best in class technology

Through our exclusive perpetual licence from Radisson Hotel Group (which under its new Jin Jiang ownership is part of the world's second largest hotel group in terms of number of rooms) we have the rights to develop and operate Park Plaza branded hotels and resorts in Europe, the Middle East and Africa. This strategic partnership gives us many benefits, including access to Radisson's central reservation and distribution systems, powerful online and mobile platforms, global sales, reward programme with more than 24 million members, marketing initiatives and buying power.

In July 2019, Radisson Hotel Group announced a collaboration with WeHotel, the global hotel booking platform of new owners, Jin Jiang International. As part of this affiliation, WeHotel Prime, Jin Jiang's reward programme, is now available for high-end Radisson Hotel Group properties. PPHE is delighted to be part of a wider global distribution and marketing reach as we also continue to grow as a Group.

Through our partnership with Radisson Hotel Group, we have benefited, particularly over the summer of 2019, from a number of technology focused investment programmes including the launch of radissonhotels.com in July 2019. This is a multi-brand and mobile-first global website giving guests and loyalty members access to more than 1,100 hotels worldwide, including PPHE's portfolio. The new Radisson Hotels App, which launched shortly afterwards, provides our guests with an even more personalised user experience.

As part of Radisson Hotel Group's five-year operating plan, we will benefit from a multi-million-dollar technology investment, which unifies tasks such as reservations, loyalty, sales, property management and more. We look forward to the full roll-out, which will benefit our guests and team members alike, while further increasing the efficiency of our business.

We operate our own art'otel lifestyle brand (also marketed through our partnership with Radisson Hotel Group), and our majority-owned Croatian subsidiary operates several of its properties under the Arena Hotels & Apartments and Arena Campsites brands. Our multi-brand approach enables us to develop and operate properties across several segments of the hospitality market, and to choose the most appropriate brand for each property so that we can maximise returns from our assets.

Our people and values

Our people and our values of Trust, Respect, Teamwork, Enthusiasm, Commitment and Care are at the heart of our business success. We foster a high performing culture, led by our talented leadership team, in which engaged team members deliver best in class guest experiences, supported by high quality hotels and resorts.

We have refreshed our strategic purpose to ensure that our strategic objectives and business culture are aligned. At the start of the year we hosted an international leadership summit themed 'We Are Creators', the objective of which was to present our Company blueprint based on our owner/operator business model to more than 150 senior team members. We set out how our culture and day-to-day activities need to work together to deliver our corporate agenda, enhance guest experience and deliver value to all stakeholders. This Company blueprint has been rolled out across three out of our four regions, supported by in-country training workshops.

First class leadership team

We have a wealth of talent within the Group. Our Executive Leadership Team has decades of experience in the hospitality real estate industry, with all of the team rising through the ranks of the Group. They define and disseminate the Company's vision for future growth and success.

Our success and ambition are underpinned by our strong leadership team and culture of connecting, inspiring, innovating and empowering colleagues.

Looking after our team

We aim to create an open, fun and inclusive working environment where our people feel motivated and empowered. Team members are supported in their professional development and through our bespoke learning and development platform, you:niversity of which several programmes in 2019 won awards and key accolades, including Talent Development Team of the Year (Institute of Hospitality) and Excellence in Promoting Careers and Excellence in Learning & Development (HR in Hospitality). Our annual team member survey measures the engagement levels of our team members and in 2019, we were delighted that the engagement index score for the year was 84.4% (2018: 83.6%).

Pressures on the hospitality labour market have been well publicised. Like others operating in the sector, having a highly engaged workforce and attracting and retaining the right people are key priorities for us and crucial to our long-term success. To tackle some of these challenges, we have progressed several initiatives, alongside our award-winning bespoke learning and development programmes, to ensure that we can attract and retain the right people.

In addition to our Croatian region, we have in-sourced housekeeping services at our UK hotels which have ensured we employ the right team members and that our high standards of service are maintained at our properties. Similar to owning the property assets, this action was about giving us the control we need to ensure that the highest standards are met. Following the success of this strategy, we are reviewing whether to extend this approach to housekeeping services in our other regions.

One of the challenges for the wider industry is attracting workers into major cities where residential accommodation and travel is costly, such as London. To help address this issue, we acquired a property in Chiswick Park (the Old Bakery) in summer 2019, which has rooms to accommodate about 30 people who then commute to our properties on London's South Bank. We are considering the purchase of further properties to attract and retain the best people.

On behalf of the Board, I would like to thank all our team members for their ongoing hard work and commitment.

Guest experience

The Group's own dedicated Technology & Business Solutions division has progressed a number of guest experience programmes throughout 2019. This included IT security initiatives to support guest safety and security, along with new best practice policies and dedicated training programmes for team members (Information Security Awareness training solution).

We understand that technology plays a huge part in our guests' overall experience when staying with us. In addition to benefiting from access to technology programmes from our strategic partner Radisson, we are ourselves continuing to trial new solutions and applications to evolve our offering.

We recognise that our people make us who we are, and our recruitment strategy is centred on building teams of talent who reach out and engage with guests, making them feel welcome, valued, and inspired by the surroundings and excellent service. This commitment to guest experience has once again been recognised in our most recent online reputation score (as measured using ReviewPro's Guest Rating Score), which increased by 0.7 percentage points to 88.0% in 2019. These results show that our effort to incorporate guest feedback into our repositioning programme and our day-to-day service offering has proven successful.

Furthermore, our Guest Rating Scores at our three newly repositioned hotels significantly improved. At Park Plaza Vondelpark Amsterdam the Guest Rating Score increased 6.4 points to 90.1% following the relaunch of the hotel (prior to relaunch the score was 83.7%). Holmes Hotel London increased to 92.1% following the repositioning project, an increase of 7 points from 85.1% at the beginning of 2019. Park Plaza Utrecht, which started to see the benefits of the repositioning, increased by 8.2 points from 78.3% for the first half of 2019, to 86.5% for the final quarter of 2019.

Being part of our communities

We are committed to making a positive contribution to the communities in which we operate through charity initiatives and volunteering, supporting arts and culture, and providing jobs for those who live near to our properties.

We bi-annually support breast cancer and other health related charities. In 2019, team members and guests in the United Kingdom, the Netherlands, Germany and Hungary took part in the globally recognised charity "Movember". Our local community charity support also includes supporting disadvantaged children and their family, elderly people and the homeless. We have also supported the arts through sponsorship of young designers and cultural festivals.

Further detail of our Responsible Business initiatives is set out on pages 80 to 89 of the Annual Report and Accounts 2019.

Industry recognition

We were delighted for Park Plaza UK to be awarded the 'AA Large Hotel Group of the Year 2019-20' accolade at the 22nd annual AA Hospitality Awards in September 2019. This recognised our commitment and strategic approach to development, as well as our creative and learning development programmes, which together enable us to constantly delight our guests. This is one of the most highly regarded events in the industry and the award is testament to our owner/operator approach. The Group was awarded 'Talent Development Team of the Year' by the Institute of Hospitality Awards 2019 and at the HR in Hospitality Awards 2019 we won the 'Excellence in Promoting Careers Award'.

Our plans for 2020

Our 2019 financial results coupled with our strategic progress once again demonstrate the strength of our unique business model, the appeal of our hospitality real estate portfolio and our rigorous focus on performance. Over the last three years we completed more than £100 million asset upgrade investment projects, the continued benefit of which is being reflected in our financial performance and a significantly enhanced guest experience.

Whilst we are closely monitoring the current uncertain macro environmental developments related to the Coronavirus outbreak and its impact on travel patterns, trading for the two months in 2020 for our Group has been in line with the Board's expectations.

Our longer term outlook focuses on growth delivery through our well invested portfolio, the delivery of our more than £300 million development pipeline of new properties in London, New York and Eastern Europe and additional acquisition opportunities.

Boris Ivesha

President & Chief Executive Officer

CHIEF FINANCIAL OFFICER'S REVIEW

Building on a strong performance

Financial Results

Key financial statistics for the financial year ended 31 December 2019

	Reported in GBP (£)		Like-for-like GBP¹ (£)
	Year ended 31 December 2019	Year ended 31 December 2018	Year ended 31 December 2019	Year ended 31 December 2018
Total revenue	£357.7 million	£341.5 million	£355.8 million	£338.3 million
EBITDAR	£124.7 million	£120.7 million	£124.2 million	£120.3 million
EBITDA	£122.9 million	£113.2 million	£117.4 million	£113.6 million
EBITDA margin	34.4%	33.1%	33.0%	33.6%
Reported PBT	£38.5 million	£46.4 million	-	-
Normalised PBT	£40.7 million	£37.7 million	-	-
Reported EPS	80p	90p	-	-
Dividend per share	37p	35p	-	-
Occupancy	80.6%	79.4%	80.7%	79.4%
Average room rate	£128.5	£123.1	£128.5	£124.3
RevPAR	£103.6	£97.7	£103.7	£98.7
Room revenue	£250.6 million	£236.6 million	£249.1 million	£234.3 million
EPRA NAV per share	£25.46	£24.57	-	-
Adjusted EPRA earnings per share	128p	115p	-	-

1 The like-for-like comparison for 2019 excludes the influence of IFRS 16, which was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019. Furthermore, the like-for-like figures for the year ended December 2019 exclude the operation of Park Plaza Vondelpark, Amsterdam from August to December (the property was temporarily closed for renovations during this period in 2018). The like-for-like figures for the year ended December 2018 exclude the first three months of operation for Park Plaza Vondelpark, Amsterdam (the property was temporarily closed for renovations during this period in 2019). Furthermore, the like-for-like figures for the year ended December 2018 exclude the operation of art'otel dresden (the lease of which was terminated on 31 July 2018).

Overview 2019

We are pleased to report another year of delivering results in line with our financial expectations. We achieved good growth in revenues and profits, as the financial benefits from recently completed major repositioning projects and new openings continued to come through. In the last three years we have invested over £100 million in our repositioning and refurbishment programme, which has resulted in some disruption to our operations. Notwithstanding the loss of room stock whilst these projects were undertaken, a combination of sound planning and execution, as well as a large, well positioned portfolio, has enabled us to continue to deliver annual growth in revenues and profits throughout the last three years.

The key focus for 2019 was driving the performance of our recently refurbished hotels in London, progressing our ongoing investment programme to develop a new hotel in London and reposition and renovate several properties in the United Kingdom, the Netherlands and Croatia. In total, we invested more than £72 million in these initiatives during the year. Whilst it is early days, we are on course to deliver the overall targeted return from this investment.

We are pleased to report an EPRA NAV per share of £25.46 (2018: £24.57) and adjusted EPRA earnings per share of 128 pence (2018: 115 pence), reconfirming the value we created for our shareholders through our strategic focus on our owner/operator model, combined with in-house development. As a result of the increase in our cash earnings, the Board proposed to increase the final dividend by 5.3% to 20 pence per share, which brings the total dividend over the year 2019 to 37 pence per share (2018: 35 pence per share).

Operational performance

Revenue

On a like-for-like¹ basis, total revenue increased by 5.2% to £355.8 million and reported total revenue was up 4.8% to £357.7 million, notwithstanding some currency headwinds in the year.

Growth was primarily driven by roomstock coming back on stream following the completion of the repositioning programme, and a strong rate led RevPAR performance in the United Kingdom across a number of hotels.

Like-for-like¹ RevPAR was £103.7, an increase of 5.1% (2018: £98.7), led by a 3.4% increase in average room rate to 128.5 (2018: £124.3). Like-for-like¹ occupancy improved by 130 bps to 80.7% (2018: 79.4%). Whilst RevPAR growth was predominantly London led, the Netherlands regions also generated a positive contribution. Overall, reported RevPAR was 103.6 (2018: £97.7), up 6.0%, driven by a 4.4% increase in average room rate and a 120 bps improvement in occupancy.

As a result of the strong RevPAR growth, in combination with additional roomstock, like-for-like room revenue was up 6.3% to £249.1 million (2018: £234.3 million).

Year-on-year room revenue growth

£ million

Reported 2018

236.6

United Kingdom

- Like-for-like growth

12.5

The Netherlands

- Like-for-like growth

- Refurbishments

2.1

0.9

Germany

- Like-for-like growth

- Lease termination art'otel dresden

0.8

(1.7)

Croatia

- Like-for-like decline

(0.6)

Reported 2019

250.6

EBITDA and EBITDA margin

On a like-for-like¹ basis, EBITDA increased by 3.4% to £117.4 million. Group reported EBITDA increased by 8.6% to £122.9 million and EBITDA margin increased to 34.4%. EBITDA growth was driven by the rate led RevPAR growth and supported by the IFRS 16 changes on accounting for leases. The IFRS change mainly affected the EBITDA of two of the Group's hotels, which are operated under a short-term operating lease.

Although we continue to see labour related cost pressures in all the markets in which we operate, we were able to maintain margins in two of our four regions. The EBITDA margin in the Croatian region decreased by 110 bps to 29.8%, mainly driven by an average rate related RevPAR decline of 1.9% on the back of a softer than expected performance in high season.

IFRS 16

From 1 January 2019 the Group adopted the latest accounting standard for leases, IFRS 16, which is essence aims to recognise the assets and liabilities of virtually all leases on balance sheet. Previously leases that were classified as operating leases were not recognised on the balance sheet, with the payment charged to rent expense included in EBTIDA. Following the implementation of IFRS 16 from the start of 2019 the Group has recognised the future payment obligations as liabilities and the corresponding right-of-use assets as assets within the balance sheet. In accordance with the new accounting treatment, instead of rent expense, the assets are now subject to charge for depreciation and the liabilities incur a financial expense, both classified below EBITDA in the income statement. As described in the table below, as a result of the implementation, EBITDA increased by £5.3 million however this was offset further down the income statement by higher charges for depreciation and financial expenses causing a net decrease of £0.4 million on profit before tax.

	According to the previous accounting policy £'000	The change £'000	As presented according to IFRS 16 £'000
Operating expenses	(233,295)	271	(233,024)
Rent expenses	(6,822)	5,048	(1,774)
EBTIDA	117,575	5,319	122,894
Depreciation and Amortisation	(38,032)	(3,717)	(41.749)
Interest on lease liabilities	(7,114)	(2,032)	(9,146)
Profit before tax	38,907	(430)	38,477

Profit and earnings per share

Normalised profit before tax increased by 7.9% to £40.7 million (2018: £37.7 million). Normalised profit before tax was positively supported by the increased EBITDA but partially offset by an increase in depreciation costs of £2.1 million on the back of the recent investment programme. The implementation of IFRS 16 has reduced the Group's normalised profit before tax by £0.4 million. Below is a reconciliation table from reported to normalised profit.

As discussed above, depreciation increased in the year from £35.9 million to £41.7 million, mainly as a result of the implementation of IFRS 16. Although depreciation is recorded in accordance with GAAP, internally we consider our ongoing average capital expenditure (capex) over the lifespan of our hotels as a more relevant measure in determining profit, which in the hospitality industry is calculated as approximately 4% of total revenue. Our EPRA earnings number set out below is calculated using the 4% rate instead of the reported non-cash depreciation charge.

Reported profit before tax decreased by £7.9 million to £38.5 million (2018: £46.4 million). 2018 reported profit was affected by non recurring items which mainly include the one-off revaluation of the Company's previously held equity interest in art'otel london hoxton.

	Reconciliation reported to normalised profit
	Year ended 31 December 2019 £m	Year ended 31 December 2018 £m
Reported profit before tax	38.5	46.4
Termination of operating lease	-	3.1
Gain on revaluation of previously held interest in art'otel london hoxton development	-	(20.3)
Expenses in connection with transfer to Premium listing	-	1.6
Results from marketable securities	(0.9)	0.7
Remeasurement of lease liability	3.4	4.8
Refinance costs and expenses (including termination of hedge)	-	0.3
Park Plaza Westminster Bridge London fair value adjustment on income swaps and buy-back of Income Units	0.9	1.0
Forfeited deposits from rescinded sale contracts of Income Units at Park Plaza Westminster Bridge London to private investors	-	(0.1)
Revaluation of Park Plaza County Hall London Income Units	(0.9)	-
Capital loss on disposal of fixed assets and inventory	0.1	-
Pre-opening expenses	0.7	0.2
Release of provision for litigation	(1.1)	-
Normalised profit before tax	40.7	37.7

Reported basic/diluted earnings per share for the period were 80 pence, a decrease of 11% (2018: 90 pence).

The table above provides selected data from the Group's reported balance sheet and profit and loss accounts for the year ended 31 December 2019. With this table, the Group aims to assist investors in making a further analysis of the Group's performance and capital allocation, separating its excess cash position (to fund further growth), the development projects and the assets of Arena Hospitality Group d.d. This data is additional to the segments that are monitored separately by the Board for resource allocations and performance assessment, which are the segments of the Group.

	PPHE Hotel Group			Arena Hospitality Group⁶		Total
	Trading properties £m	Excess Cash⁴ £m	Non-trading projects³ £m	Trading properties £m	Excess Cash⁴ £m	PPHE Hotel Group Reported £m
Balance Sheet
Book-value properties (excluding Income Units at Park Plaza Westminster Bridge London sold to third parties)¹	645.3	-	99.3	251.9	-	996.5
Right-of-use asset¹	194.1	-	-	24.6	-	218.7
Book value intangible assets	16.3	-	-	1.7	-	18.0
Book value non-consolidated investments	-	-	13.7	4.4	-	18.1
Other long-term assets	18.0	-	-	4.2	-	22.2
Working capital	(16.8)	-	-	(7.3)	-	(24.1)
Cash and liquid investments	46.0	34.0	-	6.8	76.8	163.6
Bank/Institutional loans (short/long term)	(567.1)	-	-	(111.2)	-	(678.3)
Finance lease liability, land concession and other provisions	(206.2)	-	-	(30.1)	-	(236.3)
Deferred profit Income Units in Park Plaza Westminster Bridge London⁵	(10.2)	-	-	-	-	(10.2)
Other provisions	(5.6)	-	-	(1.9)	-	(7.5)
Total capital consolidated	113.8	34.0	113.0	143.1	76.8	480.7
Minority shareholders	-	-	-	(67.3)	(36.2)	(103.5)
Total capital employed by PPHE Hotel Group shareholders	113.8	34.0	113.0	75.8	40.6	377.2
Normalised profit
Revenue	265.4	-	0.4	91.9	-	357.7
EBITDAR	95.5	-	0.4	28.7	-	124.7
Rental expenses	(0.2)	-	-	(1.6)	-	(1.8)
EBITDA	95.4	-	0.4	27.1	-	122.9
Depreciation	(30.7)	-	-	(11.1)	-	(41.8)
EBIT	64.7	-	0.4	16.0	-	81.1
Interest expenses: banks and institutions	(19.9)	-	-	(3.1)	-	(23.0)
Interest on finance leases	(8.6)	-	-	(0.5)	-	(9.1)
Westminster Bridge London	(10.5)	-	-	-	-	(10.5)
Other finance expenses and income	1.2	0.2	0.5	0.1	-	2.0
Minority interests	-	-	-	0.2	-	0.2
Result from equity investments	-	-	-	-	-	-
Normalised profit before tax 31 December 2019²	26.9	0.2	0.9	12.7	-	40.7
Reported tax	(0.5)	-	-	4.6	-	4.1
Normalised profit after reported tax	26.4	0.2	0.9	17.3	-	44.8
Normalised profit attributable to minority shareholders	-	-	-	(8.3)	-	(8.3)
Normalised profit after tax attributable to PPHE Hotel Group shareholders	26.6	-	0.9	9.0	-	36.5

¹These are stated at cost price less depreciation. The fair value of these properties is substantially higher.

²A reconciliation of reported profit to normalised profit is provided on page 14

³This contains properties that are in development.

⁴Excess cash is directly available for further investments and developments.

⁵This is the book value of units in Park Plaza Westminster Bridge London netted with the advanced proceeds these investors received in 2010.

⁶Arena Hospitality Group d.d is listed on the Zagreb Stock Exchange. The market capitalisation at 31 December 2019 is £218.4 million.

Real estate performance

EPRA NAV

Given the Group's real estate driven business model, certain EPRA performance measurements are disclosed to aid investors in analysing the Group's performance and understanding the value of the Group's assets and its earnings from a property perspective. As a developer, owner and operator of hotels, resorts and campsites, we generate returns by both developing the assets we own and operating all of our properties to their full potential.

In June 2019, the Group's properties (with the exception of operating leases, managed and franchised properties) were independently valued by Savills (in respect of properties in the Netherlands, UK and Germany) and by Zagreb nekretnine Ltd (ZANE) (in respect of properties in Croatia)¹. Based on their valuations we have calculated the Group's EPRA net asset value (EPRA NAV).

The EPRA NAV as at 31 December 2019, set out in the table below amounts to £1,091.7 million, which equates to £25.46 per share. EPRA NAV was negatively affected by adverse currency movements and overall presented a year-on-year growth of 3.6%. On a constant currency basis, EPRA NAV (after dividends) grew by 5.9% to £26.01.

¹The properties were valued in local currency and translated to Pound Sterling using the closing exchange rate as per 31 December 2019.

	£m	Per share (£)
EPRA NAV (as at 31 December 2018)	1,053.0	24.57
Revaluation done in 2019¹	46.0	1.07
Earnings in 2019	33.9	0.79
Dividends	(15.3)	(0.36)
Other movements²	(2.9)	(0.07)
Foreign currency translation effects	(23.0)	(0.54)
EPRA NAV (as at 31 December 2019)	1,091.7	25.46

¹ The revaluation was done based on the same foreign exchange rates as 31 December 2018.

² Includes other changes in equity, deferred taxes, and the effects of the exercise of options.

	31 December 2019 £m	31 December 2018 £m
NAV per the financial statements	377.3	373.5
Effect of exercise of options	4.0	4.7
Diluted NAV, after the exercise of options¹	381.2	378.2
Includes:
Revaluation of owned properties in operation (net of non-controlling interest)²	699.2	655.8
Revaluation of development property (art'otel london hoxton)³	-	5.4
Revaluation of the JV interest held in two German properties
(net of non-controlling interest)	3.9	3.8
Excludes:
Fair value of financial instruments	(0.7)	(0.4)
Deferred tax	(6.7)	(9.4)
EPRA NAV	1,091.7	1,053.0
Fully diluted number of shares (in thousands)¹	42,872	42,860
EPRA NAV per share (in £)	25.46	24.57

¹The fully diluted number of shares excludes treasury shares but includes 412,290 outstanding dilutive options (as at 31 December 2018: 522,500).

²The fair values of the properties were determined on the basis of independent external valuations prepared in the summer of 2019.

³In 2018 the development site of art'otel london hoxton was independently valued at £82.5 million. Given that the site is under development it was not revalued in 2019 and is measured at cost.

Below is a summary of the valuation basis of our assets. The property market value, the discount rate and the cap rate have been taken from the independent valuer's report.

Location	Number of properties	Number of rooms/ pitches	Property market value (£m)	Average value per room/pitch (£)	Discount rate	Cap rate
United Kingdom
- London¹	6	2,284	933	408,275	7.5%-9%	5%-6.5%
- Provinces	2	365	36	98,630	10%-10.75%	7.5%-8.25%
Netherlands
- Amsterdam	4	849	257	302,981	7.25%-8.5%	5.25%-6.5%
- Provinces	2	224	40	179,127	9%-9.5%	7%-7.5%
Germany	3	547	94	172,073	8.25%-8.75%	6%-6.25%
Croatia
- Hotels and apartments	13	2,775	145	52,279	8.0%-10%	7%-9%
- Campsites	8	5,827	99	17,010	9%-11%	7%-9%

¹Excluding units of Park Plaza Westminster Bridge London owned by third parties.

The Group has a proven track record of acquiring properties which we believe have significant upside potential. We undertake (re)development and redesign of these assets to maximise operational excellence and capital appreciation. Through refinancing these properties, we are able to release capital for new investments, enabling further growth of our Group. With our latest investments in London and New York, we aim to continue this successful strategy.

Capex

In 2019, we continued with our investment programme in order to upgrade the Group's property portfolio. In total our capex investment in 2019 amounted to £72 million, including the major repositioning projects of Park Plaza Utrecht and Park Plaza Vondelpark, Amsterdam in the Netherlands, as well as Holmes Hotel London in the United Kingdom. In Croatia, we have completed a major repositioning of the Arena Kažela Campsite.

As we enter 2020, major repositioning programmes are well underway in Croatia, where Hotel Brioni will be the most significant with a £27 million investment programme. The current 2-star hotel will be repositioned to a 5-star 227 room, full service luxury hotel, with stunning views over the Adriatic sea and the Brioni Island.

In addition to the above repositioning programme, the Group commenced construction of the art'otel london hoxton. The Group is progressing with its plans to build a 27-storey mixed-use building for an estimated further investment of £200 million. The planned scheme includes a 343-room hotel, five floors of office space, top-floor meeting and events facilities, and multiple food and beverages offerings, including a sky bar.

The average maintenance capex profile across the estate has historically been around 4% of revenue, through the hotel cycle.

EPRA earnings and cash flow

The main adjustment to the normalised profit included in the Group's financial statements is adding back the IFRS depreciation charge, which is based on assets at historical cost, and replacing it with a charge calculated at 4% of the Group's total revenues. This represents the Group's expected average cost to maintain the estate in good quality. The basis for calculating the Company's 2019 adjusted EPRA earnings of £54.2 million (2018: £48.5 million) and the Company's adjusted EPRA earnings per share of 128 pence (2018: 115 pence) is set out in the table below.

	12 months ended 31 December 2019 £m	12 months ended 31 December 2018 £m
Earnings attributed to equity holders of the parent Company	33.9	38.1
Depreciation and amortisation expenses	41.7	35.9
Revaluation of Park Plaza County Hall London Income Units	(0.9)	-
Gain on re-measurement of previously held interest in joint venture	-	(20.3)
Early close-out costs of debt instrument	-	0.3
Changes in fair value of financial instruments	(0.7)	1.0
Non-controlling interests in respect of the above³	(7.8)	(6.1)
EPRA earnings	66.2	48.9
Weighted average number of shares (LTM)	42,390,693	42,335,136
EPRA earnings per share (in pence)	156	116
Company specific adjustments¹:
Capital loss on buy-back of Income Units in Park Plaza Westminster Bridge London previously sold to private investors	0.7	0.6
Termination of operating lease⁴	-	3.1
Remeasurement of lease liability⁵	3.4	4.8
Other non-recurring expenses (including pre-opening expenses)	0.8	0.2
Expenses in connection with transfer to premium listing	-	1.6
Gain from settlement of legal claim⁸	(1.1)	-
Adjustment of lease payments⁶	(2.2)	-
Investment tax credit⁷	(5.1)	-
Maintenance capex²	(14.3)	(13.6)
Non-controlling interests in respect of the above³	5.8	2.9
Company adjusted EPRA earnings	54.2	48.5
Company adjusted EPRA earnings per share (in pence)	128	115

Reconciliation Company adjusted EPRA earnings to normalised reported profit before tax
Company adjusted EPRA earnings	54.2	48.5
Reported depreciation	(41.7)	(35.9)
Non-controlling interest in respect of reported depreciation	7.8	6.0
Maintenance capex (4% of total revenues)	14.3	13.6
Non-controlling interest on maintenance capex	(5.8)	(2.9)
Adjustment of lease payments⁶	2.2	-
Investment in credit⁷	5.1	-
Profit attributable to non-controlling interest	8.7	5.4
Reported tax	(4.1)	3.0
Normalised profit before tax	40.7	37.7

¹The 'Company specific adjustments' represent adjustments of non-recurring or non-trading items.

²Calculated as 4% of revenues, which represents the expected average maintenance capital expenditure required in the operating properties.

³Non-controlling interests include the non-controlling shareholders in Arena and third-party investors in income units of Park Plaza Westminster Bridge London.

⁴In March 2018, the Group entered into an agreement to terminate the loss making lease agreement for the 174-room art'otel dresden, effective from 31 July 2018. To exit from this lease, the Group incurred an expense of £3.1 million. This termination resulted in a rent reduction that benefits the Group's EBITDA by approximately £0.5 million annually.

⁵Non-cash remeasurement of lease liability relating to minimum future CPI increases.

⁶Lease cash payments on account of lease liability redemption which are not recorded as an expense due to the implementation of IFRS 16.

⁷Investment tax credit received in Croatia. See note 27f in the financial statements.

⁸Release of provision as a result of a settlement reached in a legal dispute in Croatia. See note 16a in the financial statements

Funding

Alongside traditional bank funding, the Group has used various financing options in order to optimise returns while remaining at comfortable leverage levels. These include sale-and-finance leaseback arrangements (>100 years), arrangements whereby the returns of individual rooms were sold to investors and the secondary purchase offer in a listed subsidiary.

Arrangements with unitholders involve the sale of individual Income Units which directly relate to an individual room in a property (a 'Unit') to third party investors; these investors pay upfront and receive a contractual right to the future cash flow from the individual Units with no repayment obligation on the Group. The Group raised funds through the sale of Units in its Park Plaza Westminster Bridge London Hotel during its construction. The proceeds were used to build the hotel.

The Group has taken the opportunity to sell the land of certain assets, whilst securing a long-term finance leaseback, to take advantage of the low interest rate environment and secure long-term funding with no amortisation payments. All finance leases, except one, have lease payments that are fixed with annual capped/collared CPI/RPI adjustments. The finance leases, valued on a leasehold basis (i.e. the value of the assets, net of the accounted finance lease liability), have been included in the Group's EPRA NAV.

In addition to the above finance arrangements, the Group also raised funds through the secondary offering in Arena Hospitality Group d.d, its listed subsidiary in Croatia, in 2017, and retained a controlling shareholding. The proceeds, totalling €100 million, are currently used to fund the expansion of Arena Hospitality Group and upgrading of certain properties.

In the case of traditional bank funding, whereby assets are typically ringfenced into single or Group facilities, the loan to value ratio policy varies between 50% and 65%, depending on the location of the asset. The current net bank debt leverage of the Group stands at 29.4%, with three properties currently unencumbered, including the Hoxton development site.

The Group's total assets (properties at fair value) represent a value after the deduction of lease liabilities and unit holder liabilities. Accordingly, in the total loan-to-value (LTV) analysis of the Group, management considers the value of the freehold and long leasehold assets (net of these liabilities) compared with its bank funding (i.e. excluding the lease and unit holder liabilities), which management believes is the most accurate representation of the Group's total leverage position.

Bank financing	m
Over 5-year debt	609.9
Less than 5-year debt	68.4
Cash	163.6
Net bank debt	514.7

Equity
- Reported	377.3
- Market value restatement	710.4
Equity attributable to shareholders of the Group¹	1,087.7
Non-controlling interest
- Reported	103.5
- Market value restatement²	44.1
Equity attributable to non-controlling interest	147.6

Total equity	1,235.3

Group's total asset (properties at fair value)	1,750.0

¹Equity attributable to shareholders of the Group based on EPRA NAV excluding the £4.0 million effect due to exercise of dilutive options.

²The market value restatement for the equity attributable to non-controlling interest represents the minority's share in the EPRA NAV adjustments.

The Group reported a gross bank debt liability of £678.3 million (31 December 2018: £697.3 million) and net bank debt of £514.7 million (31 December 2018: £479.6 million). Key movements in net bank debt in 2019 included a reduced cash position and liquid investments of £35.0 million, primarily due to the acquisition of a 50% interest in the freehold site in Manhattan in New York, the acquisition of a freehold site close to Waterloo Station in London and the significant capex in our real estate investment programmes and a dividend payment offset by the Group's cash from operations.

The table below provides a further breakdown of the Group's net bank debt position.

Loan maturity profile at 31 December 2019 (£m)

	Total	1 year	2 years	3 years		4 years	5 years	Thereafter
£m	678.3	13.4	13.4	13.4		15.1	13.1	609.9

· Average cost of bank debt 3.1%

· Average maturity of bank debt 7.1 years

· Group average bank interest cover 4.4

Key characteristics debt for operating properties

· Limited to no recourse to the Group

· Asset backed

· Borrowing policy 50-65% loan-to-value

· Portfolio and single asset loans

· 12 facilities with seven different lenders

· Covenants on performance and value (facility level)

Strong Cover Ratio

	ICR¹	DSCR²
2018	4.2x	2.5x
2019	4.4x	2.7x

¹EBITDA, less unitholder and lease payments, divided by bank interest.

² EBITDA, less unitholder and lease payments, divided by the sum of bank interest and yearly loan redemption.

Acquisitions and development pipeline

Our in-house team is continuously seeking out and evaluating opportunities to expand our estate across prime locations, which we believe will offer attractive returns to shareholders.

In our strategy to drive long-term value we take a disciplined, focused approach to capital deployment. We aim to optimise the value of our existing portfolio and, where appropriate, extract value to fund new development opportunities in order to drive sustainable long-term growth. We are disciplined in selecting and progressing an investment opportunity, only targeting real estate with upside potential which fits our long-term growth strategy and above all creates strong shareholder value.

The Group's acquisition criteria include:

· prime location;

· attractive geographies, (this includes territories where the Group is not currently present);

· opportunity to create significant capital value; and

· risk adjusted accretive IRRs.

We have a £300 million plus pipeline of new hotels, including iconic development in Hoxton London and New York, scheduled to open in 2023. These are art'otel london hoxton and a site in New York City, planned to open as an art'otel. The Group furthermore announced the acquisition of a plot of land near Waterloo Station in London, for which it is currently in the process of obtaining planning consent for a hotel development. The Group's Croatian subsidiary, Arena, has contracted to acquire a hotel in Belgrade, Serbia and, post period end, announced that it has entered into a lease agreement to develop a hotel in Zagreb Croatia.

Shareholder return

The table below shows cash returns on our operational assets and our development assets and excess cash. Development assets and excess cash are not yielding until a hotel opens its operations. When development projects become operational, the yield of these operational assets will have a positive impact on the implied return.

31 December 2019	Operational assets £m	Development asset and excess cash £m	Total £m
Net assets employed	1,637.0	113.0	1,750.0
Bank financing	(625.5)	110.8	(514.7)
Minority interest	(111.4)	(36.2)	(147.6)
EPRA NAV¹	900.1	187.6	1,087.7
	82.8%	17.2%	100.0%
Recurring adjusted EPRA earnings	53.1	1.1	54.2
Implied return on EPRA NAV	5.9%	0.6%	5.0%
Implied return on Company market capitalisation²	8.9%	0.6%	6.9%

¹EPRA NAV excluding the £4.0 million effect due to exercise of dilutive options provided on page 55 of the Annual Report and Accounts 2019.

²Company market capitalisation is based on the market share price as at 31 December 2019 (1,850 pence).

Dividend

The Board is proposing a final dividend payment of 20 pence per share (2018: 19 pence per share). When combined with the interim ordinary dividend of 17 pence per share (2018: 16 pence per share) paid to shareholders on 15 October 2019, the total ordinary dividend for the year ended 31 December 2019 is 37 pence per share (2018: 35 pence), an increase of 5.7%.

Subject to shareholder approval at the Annual General Meeting, to be held on 19 May 2020, the dividend will be paid on 22 May 2020 to shareholders on the register at 24 April 2020. The shares will go ex-dividend on 23 April 2020.

The increase in total ordinary dividends for the year is in line with the Group's progressive dividend policy whilst retaining proper and prudent reserves and the capacity to secure further attractive development opportunities as and when they arise. The dividend reflects the Board's continued confidence in its strategy, integrated business model and future prospects. The graph below highlights the progressive dividend policy, showing the dividend payments as a percentage of adjusted EPRA earnings over the last six years.

Dividend growth as % of adjusted EPRA earnings:

	Dividend per share (pence)	Adjusted EPRA earnings per share (pence)	Dividend as % of EPRA earning per share
2014	19	91	21%
2015	20	96	21%
2016	21	97	22%
2017	24	104	23%
2018	35	115	30%
2019	37	128	29%

Daniel Kos

Chief Financial Officer & Executive Director

BUSINESS REVIEW

UNITED KINGDOM PERFORMANCE

Property portfolio

The Group has a strong portfolio in the upper upscale segment of the London hotel market with more than 3,187 rooms in operation. Four of the Group's London hotels are centred around the popular South Bank, with further properties in the busy Victoria and fashionable Marylebone areas. There are also a total of three properties in the UK regional cities of Nottingham, Leeds and Cardiff. Hotels with an ownership interest include: Park Plaza London Riverbank, Plaza on the River London, Holmes Hotel London, Park Plaza Victoria London, Park Plaza Westminster Bridge London, Park Plaza London Waterloo, Park Plaza County Hall London¹, Park Plaza London Park Royal, Park Plaza Leeds, Park Plaza Nottingham. Park Plaza Cardiff¹ operates under a franchise agreement.

Total value of UK property portfolio²

£969 million

¹Revenues derived from these hotels are accounted for in Management and Holdings and their values and results are excluded from the data provided in this section.

Hotel operations

	Reported in GBP (£)		Like-for-like in GBP (£)³
	Year ended 31 Dec 2019	Year ended 31 Dec 2018	Year ended 31 Dec 2019	Year ended 31 Dec 2018
Total revenue	£207.4 million	£195.1 million	£207.4 million	£195.1 million
EBITDAR	£71.0 million	£66.8 million	£70.8 million	£66.8 million
EBITDA	£70.7 million	£65.0 million	£69.2 million	£65.0 million
Occupancy	87.7%	85.7%	87.7%	85.7%
Average room rate	£152.4	£145.1	£152.4	£145.1
RevPAR	£133.7	£124.4	£133.7	£124.4
Room revenue	£152.7 million	£140.2 million	£152.7 million	£140.2 million

²Independent valuation by Savills in 2019, excluding the development sites in Hoxton, London and nearby Waterloo Station.

³The like-for-like figures for 31 December 2019 are adjusted to remove the effect of IFRS 16.

Operational performance

Hotel operations in the UK performed well during the year as the benefits from the upgraded room inventory at recently opened and repositioned properties in London continued to build in the period.

Total reported revenue increased by 6.3% to £207.4 million, primarily driven by the continued ramp up in trading of several hotels in London and the relaunch of Holmes Hotel London in the first half of the year following an extensive repositioning programme.

The performance at Park Plaza London Waterloo stablised in just three years from opening, quicker than anticipated for a new hotel development, and the total value created from development to the sale and finance leaseback was £120 million. Park Plaza London Riverbank also performed strongly following completion of a major £54 million repositioning project and extension, which increased the room inventory of this hotel by 40%. The Group's strong presence on London's South Bank gives it the ability to accommodate large meetings and events, driving premium rates.

Park Plaza Westminster Bridge London and Park Plaza London Waterloo outperformed their competitive set in all key operational metrics: occupancy, average daily rate and RevPAR. Outside of London, Park Plaza Nottingham also outperformed its competitive set in all key operational metrics.

Reported room revenue increased by 8.9% to £152.7 million.

Reported RevPAR was £133.7, up 7.4%, driven by a 200 bps increase in occupancy to 87.7%. Average room rate increased by 5.0% to £152.4.

Reported EBITDAR grew by 6.4% to £71.0 million and Reported EBITDA increased by 8.8% to £70.7 million, reflecting the improving performance as the new room inventory matures. On a like-for-like³ basis, EBITDAR increased by 6.0% to £70.8 million and EBITDA was up 6.4% to £69.2 million.

Asset management projects

2019 investment projects

The investment programmes for our London hotels continued during the year, ensuring that these properties are well-positioned within the market.

The extensive repositioning of Holmes Hotel London (formerly known as Park Plaza Sherlock Holmes) was completed in May on time and budget, following a £9 million investment, to maximise the property's hospitality real estate potential and provide guests with a premium boutique offer which better reflects the local area. All 118 rooms were refurbished, as were the public areas. This included the relocation of the property's main entrance from Baker Street to the more aspirational Chiltern Street and the launch of a new restaurant, 'Kitchen at Holmes'. Since opening, the property's reimagined design and layout and 5-star service level have been very positively received by guests, reflected in an average guest rating score of 92.1% across independent review websites.

The final phase of Holmes Hotel London's repositioning is expected to be completed in 2020 and will see the hotel's meetings and events space reconfigured to a new subterranean self-contained space, bringing together meeting rooms, breakout spaces and a private kitchen.

At Park Plaza Victoria London, renovation work to upgrade the public spaces, such as the reception area and bar, were completed in the first quarter of 2019.

In addition, a property in Chiswick Park, London was acquired and refurbished in 2019 with the purpose of providing accommodation for team members from 2020. The total investment was £2.9 million.

Development pipeline

The development pipeline in the UK will bring two art'otels to London in the next three years.

In Hoxton London, site works are progressing to develop the Group's fully owned art'otel london hoxton. Improved planning consent has been granted for a property of 27 floors, comprising 343 hotel rooms which includes 60 long-stay apartments and suites, and five floors of office space, as well as restaurants, gym facilities and meetings and events space. The development will house a fully accessible art gallery and luxury VIP cinema (available for corporate events and private hire), which will bring the arts to the local community. Partnership discussions with several artists are underway. Development of the property is expected to complete in 2023.

Development of art'otel london battersea power station by the Battersea Power Station Development Company continues as planned and is expected to complete in 2022. The hotel will be managed by the Group under a long-term management contract.

In December 2019, the Group acquired a freehold site in London, close to Park Plaza London Waterloo. The intention is to develop the site into a hotel, subject to satisfactory planning being obtained.

The United Kingdom hotel market*

In 2019, the London hotel market remained strong, driven by higher rates and an increase in demand, despite a 2.1% increase in supply.

RevPAR in the London market increased by 3.7% to £129.14, driven by a 3.6% growth in average daily rate and occupancy remained flat at 83.5%.

The Leeds market growth in the period, with RevPAR up 3.9% to £55.46, was supported by a 2.1% increase in occupancy at 79.4% and a 1.8% increase in average daily room rate to £69.82. In Nottingham, RevPAR was broadly flat at £47.74, reflecting a 1.3% increase in average daily rate to £62.93 and a 1.4% decline in occupancy to 75.9%.

* STR Global, December 2019

THE NETHERLANDS PERFORMANCE

Property portfolio

The Group has ownership interests in three hotels in the city centre of Amsterdam and a fourth property located near Amsterdam Airport Schiphol. The portfolio also extends to include two owned hotels in Utrecht and Eindhoven.

Total value of Dutch property portfolio¹

£297 million

Hotel operations

	Reported in GBP² (£)		Reported in local currency Euro (€)
	Year ended 31 Dec 2019	Year ended 31 Dec 2018	Year ended 31 Dec 2019	Year ended 31 Dec 2018
Total revenue	£53.8 million	£49.6 million	€61.4 million	€56.0 million
EBITDAR	£15.0 million	£14.2 million	€17.2 million	€16.1 million
EBITDA	£15.0 million	£14.1 million	€17.1 million	€15.9 million
Occupancy	86.2%	85.7%	86.2%	85.7%
Average room rate	£124.8	£122.6	€142.6	€138.4
RevPAR	£107.6	£105.0	€122.9	€118.6
Room revenue	£40.3 million	£37.3 million	€46.0 million	€42.1 million

	Like-for-like GBP³		Like-for-like Euro (€)³
	Year ended 31 Dec 2019	Year ended 31 Dec 2018	Year ended 31 Dec 2019	Year ended 31 Dec 2018
Total revenue	£51.9 million	£48.8 million	€59.2 million	€55.1 million
EBITDAR	£14.9 million	£14.2 million	€17.0 million	€16.0 million
EBITDA	£14.8 million	£14.1 million	€16.9 million	€15.9 million
Occupancy	86.9%	86.0%	86.9%	86.0%
Average room rate	£124.4	£123.2	€142.1	€139.1
RevPAR	£108.1	£106.0	€123.5	€119.7
Room revenue	£38.7 million	£36.7 million	€44.2 million	€41.4 million

¹Independent valuation by Savills in 2019.

²Average exchange rate from Euro to Pound Sterling for the year to December 2019 was 1.14 and for the year to December 2018 was 1.13, representing a 1.2% increase.

³The like-for-like figures for December 2019 are adjusted to remove the effect of IFRS 16. Furthermore, the like-for-like figures for December 2019 exclude the operation of Park Plaza Vondelpark, Amsterdam from August to December (the property was temporarily closed for renovations during this period in 2018). The like-for-like figures for December 2018 exclude the first three months of operation for Park Plaza Vondelpark, Amsterdam (the property was temporarily closed for renovations during this period in 2019).

Operational performance

In Euros, total revenue increased by 9.8% to 61.4 million. The main contributor to this performance was the continued ramp up in trading of Park Plaza Victoria Amsterdam following the property's extensive £20 million repositioning, which was completed in 2018. This hotel delivered RevPAR ahead of its competitive set in 2019. This improved performance was offset by the repositioning projects undertaken at Park Plaza Vondelpark, Amsterdam and Park Plaza Utrecht, which reduced the room inventory in the first half of the year. Returns on these repositioning projects started to become evident in the second half of the year when both properties were launched. Outside of Amsterdam, RevPAR at Park Plaza Utrecht outperformed its competitive set, driven by average daily rate outperformance.

RevPAR (in Euros) increased by 3.7% to 122.9, achieved through a 3.0% increase in average room rate to €142.6, and a 60 bps increase in occupancy to 86.2%. Room revenue increased by 9.2% to 46.0 million. In Sterling, RevPAR increased by 2.5% to £107.6, with average room rates up 1.8% to £124.8.

Reported EBITDAR and EBITDA increased to €17.2 million, up 6.9% and €17.1 million, up 7.7% respectively. In sterling, EBITDAR increased by 5.7% to £15 million and EBITDA was up 6.5% to £15 million.

Asset management projects

2019 investment projects

Two repositioning projects in the region were completed in the year and the properties were fully operational as of end of October.

The first of these projects was Park Plaza Vondelpark, Amsterdam, which closed completely in July 2018 and underwent a major investment project to reposition the property as a boutique, lifestyle hotel with a new premium look and feel to drive operational performance and the freehold property value. The repositioning saw all 102 hotel rooms and public areas reconfigured and enhanced. The main entrance to the hotel was relocated from a busy road to the other side of the building so guests now access the property adjacent to Vondelpark itself. The Group's Venetian-inspired destination restaurant, TOZI, was launched, servicing hotel guests and also attracting visitors to the area as well as those from the local community. The soft opening of the hotel took place in April 2019, and the hotel was relaunched in October alongside the opening of TOZI. Guest feedback has been extremely positive, scoring 8.9 on booking.com. Total investment in repositioning the property was £8 million.

The second property, Park Plaza Utrecht, is in the heart of the business district of Utrecht, the Netherlands's fourth largest city. The hotel was fully reopened to guests in October 2019 following the completion of a £6.0 million repositioning programme, which commenced in 2018. The majority of rooms were renovated, and new bathrooms installed. In addition, the public facilities were upgraded to include a new restaurant and bar, and a fitness centre, and the conferencing space was modernised to offer ten new meeting rooms and a large private event space for up to 75 guests, all with state of the art facilities.

The Netherlands hotel market*

In contrast to the strong performance for the Group, the wider Dutch hotel market was more challenging in 2019 than in the prior year. In Amsterdam, RevPAR declined by 1.3% to €121.21, mainly due to a 1.6% reduction in average room rate to €148.57, whilst occupancy declined by 0.3% to 81.6%.

Likewise, hotels in Utrecht reported a 1.4% decline in RevPAR to €81.08, as a result of a 2.7% decline in occupancy to 74.6% and a 1.4% increase in average room rate to €108.67.

The Eindhoven hotel market saw RevPAR grow by 1.1% to €52.71, reflecting a 1.5% increase in average room rate to €82.34 and a marginal decline in occupancy of 0.4% to 64.0%.

* STR Global, December 2019

CROATIA PERFORMANCE

Property portfolio

The Group's subsidiary, Arena Hospitality Group (Arena), owns and operates a Croatian portfolio of seven hotels, six resorts and eight campsites, all of which are located in Istria, Croatia's most prominent tourist region. Four of Arena's properties in Croatia are Park Plaza branded, one property is marketed under the TUI BLUE brand (part of the TUI Group) as well as Arena Hotels & Apartments and Arena Campsites brands for the remaining Arena properties.

Total value of Croatian property portfolio¹

£244 million

Operations

	Reported in GBP² (£)		Reported in local currency HRK
	Year ended 31 Dec 2019	Year ended 31 Dec 2018	Year ended 31 Dec 2019	Year ended 31 Dec 2018
Total revenue	£61.1 million	£60.0 million	HRK 519.6 million	HRK 503.8 million
EBITDAR	£19.4 million	£19.7 million	HRK 164.4 million	HRK 165.0 million
EBITDA	£18.2 million	£18.6 million	HRK 154.4 million	HRK 155.3 million
Occupancy³	63.1%	62.4%	63.1%	62.4%
Average room rate³	£91.1	£93.9	HRK 772.1	HRK 785.8
RevPAR³	£57.5	£58.6	HRK 487.1	HRK 490.4
Room revenue	£33.5 million	£34.1 million	HRK 283.5 million	HRK 285.1 million

¹Independent valuation by Zagreb nekretnine Ltd in 2019.

²Average exchange rate from Croatian Kuna to Pound Sterling for the year to December 2019 was 8.47 and for the year to December 2018 was 8.37, representing a 1.2% increase

³The average room rate, occupancy and RevPAR statistics include all accommodation units at the hotels and self-catering apartment complexes and excludes campsite pitches and mobile homes.

Operational performance

The Group's operations in Croatia delivered year-on-year revenue growth, even though the region experienced greater competition from countries such as Greece and Turkey, as well as Egypt, which returned to the Mediterranean market in the period.

The Group's operations are highly seasonal, with almost two thirds of revenue generated in the third quarter of the year. Most properties start to trade from Easter, with activity intensifying and reaching a peak in July and August, before closing from mid-October, ahead of the winter. The first half of the year was marked by lower activity, particularly in the first few months of trading due to extremely rainy and cold weather in the spring.

Reported total revenue increased by 1.9% to £61.1 million. In Croatian Kuna (HRK), reported revenue was up 3.1% to HRK 519.6 million. The most significant contributors to revenue growth were Arena One 99 Glamping and Arena Kažela Campsite.

Arena One 99, our campsite located in southern Istria, continued to ramp up in terms of trading in its second season of operation following the property's transformation to create a 4-star all-glamping resort. The site's premium proposition has been recognised through two accolades from the Croatian Tourist Awards programme for Best Glamping and Best Campsite.

Arena Kažela Campsite opened in July 2019 following completion of the first phase of its repositioning investment project. The performance during the season was encouraging and in line with expectations. The campsite recorded an increase in average daily rate of over 40% and saw revenues increase by more than 30%.

The superior quality of the campsite was recognised when it was announced winner of 'Croatia's Best Campsite 2020' by the Croatian Camping Union. The site was also awarded 4.5 out of 5 stars for 2019 from the ANWB campsite inspectors and it is already being well-received by guests. On Booking.com it has a rating of 9.0 out of 10.0 based on more than 500 reviews.

Elsewhere in the Croatian portfolio the revenue performance was stable, apart from the self-catering apartment resorts, where the number of available rooms was negatively impacted to provide accommodation for employees sourced from outside of the Istrian region.

RevPAR decreased by 0.7% to HRK 487.1, reflecting an average room rate of HRK 772.1 and a 70 bps decrease in occupancy to 63.1%.

Reported EBITDA was broadly flat at HRK 154.4 million (2018: HRK 155.3 million), with growth in profitability generated by recent repositioning and investment programmes in campsites offset by increased operational costs, particularly related to labour market pressures.

Asset management projects

2019 investment projects

Arena Kažela Campsite, which is located on the southern part of Medulin, is the largest of the Group's campsites and its position on the coast of the Adriatic Sea make it the ideal location for a brand-new style of luxury camping homes. The first phase of Arena Kažela Campsite's multi-million pound investment programme was completed and launched in July 2019, upgrading the site with 164 new, fully equipped premium and family camping homes alongside more than 1,000 spacious pitches. With the aim of providing guests with exceptional facilities which deliver a luxurious experience, the site now also offers guests two new swimming pools, new modern pool bars, an Illy coffee shop and a re-developed reception area. Arena invested £19.0 million in phase one of the programme.

Acquisition

In April 2019, Arena agreed to acquire the 88 Rooms Hotel in Belgrade, Serbia, for €6.0 million, subject to certain conditions being fulfilled

2020 repositioning projects

A further £6 million is being invested at Arena Kažela Campsite ahead of the 2020 summer season. Works began in autumn 2019 and will see further holiday homes replaced, and pitches repositioned to offer guests larger plots in prime seaside positions. In addition, all public areas, including restaurants & bar and the sports centre, will be refurbished and upgraded. When completed, Arena will have invested £25 million transforming the site into a modern 4-star camping resort which will be rebranded Arena Grand Kažela.

A major repositioning of Hotel Brioni is underway. The property, which is located 50 metres from the sea on the western coast of the Punta Verudela peninsula in Croatia, will be transformed into a branded luxury upscale property with 227 rooms. It will offer guests excellent facilities including three swimming pools (an indoor pool, an activity outdoor pool and an infinity outdoor pool), a wellness centre, a gym, kids' playground, a restaurant and bar and conferencing facilities. The total planned investment is approximately £27 million and the property is expected to open for the summer season 2021.

At Verudela Beach self-catering apartment resort, construction works commenced in October 2019 on a further £7 million programme to reposition the remaining 146 units at the resort. The project is expected to complete in time for the 2020 summer season. This programme follows the initial repositioning of ten accommodation units prior to the 2019 summer season. In total, Arena plans to invest £8.0 million in the resort.

GERMANY & HUNGARY PERFORMANCE

Property portfolio

The Group's portfolio in the region includes four properties in Berlin and one hotel each in Cologne, Nuremberg and Trier in Germany and Budapest in Hungary. Hotels with an ownership interest include: Park Plaza Berlin Kudamm¹, Park Plaza Nuremberg, art'otel berlin mitte¹, art'otel berlin kudamm and art'otel cologne. Park Plaza Wallstreet Berlin Mitte and art'otel budapest operate under operating leases and Park Plaza Trier1 operates under a franchise agreement.

Total value of German property portfolio²

£94 million

Hotel operations

	Reported in GBP³ (£)		Reported in local currency Euro (€)
	Year ended 31 Dec 2019	Year ended 31 Dec 2018	Year ended 31 Dec 2019	Year ended 31 Dec 2018
Total revenue	£29.5 million	£31.4 million	€33.7 million	€35.5 million
EBITDAR	£9.1 million	£9.0 million	€10.4 million	€10.2 million
EBITDA	£8.7 million	£5.2 million	€9.9 million	€5.9 million
Occupancy	80.7%	80.7%	80.7%	80.7%
Average room rate	£93.6	£86.9	€106.9	€98.1
RevPAR	£75.5	£70.1	€86.2	€79.2
Room revenue	£24.2 million	£25.1 million	€27.7 million	€28.3 million

	Like-for-like⁴ in GBP (£)		Like-for-like⁴ in local currency Euro (€)
	Year ended 31 Dec 2019	Year ended 31 Dec 2018	Year ended 31 Dec 2019	Year ended 31 Dec 2018
Total revenue	£29.5 million	£29.1 million	€33.7 million	€32.8 million
EBITDAR	£9.1 million	£8.7 million	€10.4 million	€9.8 million
EBITDA	£6.0 million	£5.7 million	€6.8 million	€6.4 million
Occupancy	80.7%	80.8%	80.7%	80.8%
Average room rate	£93.6	£90.3	€106.9	€101.9
RevPAR	£75.5	£72.9	€86.2	€82.3
Room revenue	£24.2 million	£23.4 million	€27.7 million	€26.4 million

¹Revenues derived from these hotels are accounted for in Management and Central Services performance and their values and results are excluded from the data provided in this section.

²Independent valuation by Savills in 2019.

³Average exchange rate from Euro to Pound Sterling for the year to December 2019 was 1.14 and for the year to December 2018 was 1.13, representing a 1.2% increase.

⁴The like-for-like figures for December 2019 are adjusted to remove the effect of IFRS 16. The like-for-like figures for December 2018 exclude the operation of art'otel dresden (the lease of which was terminated on 31 July 2018).

Operational performance

The region delivered like-for-like revenue and EBITDA growth, driven by an overall strong hotel market in Berlin, which supported growth in the average room rate. There was also a strong year-on-year performance from art'otel cologne, which benefited from a high level of trade fairs and events in the city, and from Park Plaza Nuremberg.

RevPAR at art'otel berlin mitte and Park Plaza Nuremberg outperformed their competitive sets. In Hungary, occupancy, average daily rate and RevPAR at art'otel budapest all outperformed the hotel's competitive set.

On a reported basis, total revenue (in Euros) decreased by 5.0% to €33.7 million and in Sterling reported total revenue decreased by 6.1% to £29.5 million.

Reported EBITDAR was at £9.1 million and like-for-like⁴ EBITDAR (in Euros) increased by 6.6% to €10.4 million. Reported EBITDA improved by 66.0% to £8.7 million (2018: £5.2 million), mainly due to reduced rental expenses as a result of IFRS 16 implementation.

Asset management projects

In Hungary, the lease for art'otel budapest was renewed for a further 20 years, effective from 1 January 2019. The Group plans to renovate the public areas, meeting rooms and spa at the hotel and is currently in the design phase for this project, which is expected to start towards the end of 2020 or early 2021.

The Group continues to review further projects and initiatives to drive performance in the region and create further shareholder value.

The German and Hungarian hotel market*

The hotels in Berlin saw RevPAR increase by 1.4% to €78.88, driven by a 1.5% improvement in occupancy to 79.2% and broadly flat average room rate at €99.53.

In Cologne, 2019 was a strong year for fairs and events in the city and the hotel market reported an increase in RevPAR of 8.5% to 88.58, reflecting an 7.0% increase in average room rate to €118.49 and a 1.4% increase in occupancy to 74.8%.

Hotels in Nuremberg experienced a 4.4% decline in RevPAR to €74.37, with pressure on average room rate resulting in a 3.5% decline in the period and occupancy was down 0.9%.

In Budapest, hotels experienced a good RevPAR growth of 6.3% to €71.53, due to a 7.2% increase in average room rate. Occupancy was down 0.8%.

* STR Global, December 2019

MANAGEMENT AND CENTRAL SERVICES PERFORMANCE

Our performance

Revenues in this segment are primarily management, sales, marketing and franchise fees, and other charges for central services.

These are predominantly charged within the Group and therefore eliminated upon consolidation. The segment shows a positive EBITDA as management fees that are charged, both internally and externally, exceed the costs in this segment.

Management, Group Central Services and licence, sales and marketing fees are calculated as a percentage of revenues and profit, and therefore these are affected by underlying hotel performance.

	Reported in GBP (£)		Like-for-like in GBP (£)
	Year ended 31 Dec 2019	Year ended 31 Dec 2018	Year ended 31 Dec 2019	Year ended 31 Dec 2018
Total revenue before elimination	£44.3 million	£42.0 million	£44.3 million	£42.0 million
Revenues within the consolidated Group	£(38.4) million	£(36.8) million	£(38.4) million	£(36.8) million
External and reported revenue	£5.9 million	£5.2 million	£5.9 million	£5.2 million
EBITDA	£10.3 million	£10.3 million	£9.3 million	£10.3 million

¹The like-for-like figures for December 2019 are adjusted to remove the effect of IFRS 16.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	As at 31 December
	2019 £'000	2018 £'000
Assets
Non-current assets:
Intangible assets	18,036	21,463
Property, plant and equipment	1,113,661	1,270,785
Right-of-use assets	217,990	-
Investment in joint ventures	18,151	4,346
Other non-current assets	18,358	18,027
Restricted deposits and cash	1,841	1,884
Deferred income tax asset	5,173	95
	1,393,210	1,316,600
Current assets:
Restricted deposits and cash	3,541	3,672
Inventories	2,317	2,481
Trade receivables	12,758	15,324
Other receivables and prepayments	15,065	12,016
Other current financial assets	5,221	4,449
Cash and cash equivalents	153,029	207,660
	191, 931	245,602
Total assets	1,585,141	1,562,202

Equity and liabilities
Equity:
Issued capital	-	-
Share premium	130,260	130,061
Treasury shares	(3,636)	(3,636)
Foreign currency translation reserve	8,094	23,131
Hedging reserve	(655)	(437)
Accumulated earnings	243,233	224,373
Attributable to equity holders of the parent	377,296	373,492
Non-controlling interests	103,465	105,050
Total equity	480,761	478,542
Non-current liabilities:
Borrowings	664,945	681,981
Provision for litigation	-	3,873
Provision for concession fee on land	4,730	4,330
Financial liability in respect of Income Units sold to private investors	126,704	129,151
Other financial liabilities	228,973	188,269
Deferred income taxes	7,920	7,115
	1,033,272	1,014,719
Current liabilities:
Trade payables	10,466	12,162
Other payables and accruals	47,326	41,469
Borrowings	13,316	15,310
	71,108	68,941
Total liabilities	1,104,380	1,083,660
Total equity and liabilities	1,585,141	1,562,202

The accompanying notes are an integral part of the consolidated financial statements. Date of approval of the financial statements 26 February 2020. Signed on behalf of the Board by Boris Ivesha and Daniel Kos.

CONSOLIDATED INCOME STATEMENT

	Year ended 31 December
	2019 £'000	2018 £'000
Revenues	357,692	341,482
Operating expenses	(233,024)	(220,775)
EBITDAR	124,668	120,707
Rental expenses	(1,774)	(7,535)
EBITDA	122,894	113,172
Depreciation and amortisation	(41,749)	(35,903)
EBIT	81,145	77,269
Financial expenses	(32,089)	(31,986)
Financial income	2,923	1,568
Other expenses	(5,110)	(10,688)
Other income	2,225	20,394
Net expenses for financial liability in respect of Income Units sold to private investors	(10,795)	(10,318)
Share in results of joint ventures	178	144
Profit before tax	38,477	46,383
Income tax benefit (expense)	4,105	(2,951)
Profit for the year	42,582	43,432

Profit attributable to:
Equity holders of the parent	33,915	38,052
Non-controlling interests	8,667	5,380
	42,582	43,432

Basic and diluted earnings per share (in Pound Sterling)	0.80	0.90

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Year ended 31 December
	2019 £'000	2018 £'000
Profit for the year	42,582	43,432
Other comprehensive income (loss) to be recycled through profit and loss in subsequent periods:^*
Profit (loss) from cash flow hedges	(423)	(212)
Reclassification to the income statement of cash flow hedge results upon discontinuation of hedge accounting	-	(46)
Foreign currency translation adjustments of foreign operations	(20,958)	6,515
Other comprehensive income (loss)	(21,381)	6,257
Total comprehensive income	21,201	49,689

Total comprehensive income attributable to:
Equity holders of the parent	18,580	42,232
Non-controlling interests	2,621	7,457
	21,201	49,689

* There is no other comprehensive income that will not be reclassified to the profit and loss in subsequent periods.

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

In £'000	Issued capital¹	Share premium	Treasury shares	Foreign currency translation reserve	Hedging reserve	Accumulated earnings	Attributable to equity holders of the parent	Non-controlling interests	Total equity
Balance as at 1 January 2018	-	129,878	(3,636)	18,816	(302)	198,599	343,355	97,593	440,948
Profit for the year	-	-	-	-	-	38,052	38,052	5,380	43,432
Other comprehensive income (loss) for the year	-	-	-	4,315	(135)	-	4,180	2,077	6,257
Total comprehensive income	-	-	-	4,315	(135)	38,052	42,232	7,457	49,689
Share-based payments	-	183	-	-	-	-	183	-	183
Dividend distribution²	-	-	-	-	-	(12,278)	(12,278)	-	(12,278)
Balance as at 31 December 2018	-	130,061	(3,636)	23,131	(437)	224,373	373,492	105,050	478,542
Profit for the year	-	-	-	-	-	33,915	33,915	8,667	42,582
Other comprehensive income (loss) for the year	-	-	-	(15,117)	(218)	-	(15,335)	(6,046)	(21,381)
Total comprehensive income	-	-	-	(15,117)	(218)	33,915	18,580	2,621	21,201
Share-based payments	-	199	-	-	-	-	199	-	199
Dividend distribution²	-	-	-	-	-	(15,263)	(15,263)	-	(15,263)
Dividend distribution by a subsidiary	-	-	-	-	-	-	-	(1,454)	(1,454)
Refund of cost in connection with prior year transactions with non-controlling interest	-	-	-	-	-	290	290	250	540
Transactions with non-controlling interests	-	-	-	80	-	(82)	(2)	(3,002)	(3,004)
Balance as at 31 December 2019	-	130,260	(3,636)	8,094	(655)	243,233	377,296	103,465	480,761

¹ No par value.

² The dividend distribution comprises a final dividend for the year ended 31 December 2018 of 19.0 pence per share (31 December 2017: 13.0 pence per share) and an interim dividend of 17 pence per share paid in 2019 (2018: 16.0 pence per share).

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

	Year ended 31 December
	2019 £'000	2018 £'000
Cash flows from operating activities:
Profit for the year	42,582	43,432
Adjustment to reconcile profit to cash provided by operating activities:
Financial expenses and expenses for financial liability in respect of Income Units sold to private investors	42,884	41,625
Financial income	(2,023)	(1,568)
Income tax charge (benefit)	(4,105)	2,952
Loss on buy-back of Income Units sold to private investors	694	601
Release of deposit from unit holder	-	(68)
Remeasurement of lease liability	3,359	4,822
Revaluation of Park Plaza County Hall London Units	(923)	-
Write off unamortised discount on early repayment of loan	-	314
Capital loss,net	92	-
Loss (gain) from marketable securities	(900)	679
Share in results of Joint Ventures	(178)	(144)
Gain on re-measurement of previously held interest in Joint Venture	-	(20,280)
Release of provision for litigation	(1,093)	-
Depreciation and amortisation	41,749	35,903
Share-based payments	199	183
	79,755	65,019
Changes in operating assets and liabilities:
Decrease in inventories	68	257
Increase in trade and other receivables	(40)	(922)
Increase (decrease) in trade and other payables	2,043	(5,659)
	2,071	(6,324)
Cash paid and received during the period for:
Interest paid	(44,664)	(42,778)
Interest received	1,412	1,448
Taxes paid	(1,748)	(4,183)
Taxes received	743	-
	(44,257)	(45,513)
Net cash provided by operating activities	80,151	56,614
Cash flows from investing activities:
Investments in property, plant and equipment	(72,422)	(67,251)
Purchase of remaining interest in previously held Joint Venture	-	(34,549)
Proceeds from sale of property	98	-
Loan to third party	(591)	-
Investment in Joint Venture	(13,650)	-
Purchase plot of land nearby Waterloo Station	(12,582)	-
Decrease (increase) in restricted cash	109	(1,410)
Decrease in marketable securities, net	126	19,582
Release of restricted deposit	-	22,000
Net cash used in investing activities	(98,912)	(61,628)

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMET OF CASH FLOW CONTINUED

	Year ended 31 December
	2019 £'000	2018 £'000
Cash flows from financing activities:
Proceeds from loans and borrowings	9,600	61,330
Buy-back of Income Units previously sold to private investors	(1,622)	(1,710)
Repayment of loans and borrowings	(15,455)	(78,096)
Repayment of leases	(3,385)	-
Net proceeds from transactions with non-controlling interest	(3,004)	-
Refund of cost in connection with prior year transactions with non-controlling interest	540	-
Dividend payment	(15,263)	(12,278)
Dividend payment by a subsidiary	(1,454)	-
Net cash used in financing activities	(30,043)	(30,754)
Increase (decrease) in cash and cash equivalents	(48,804)	(35,768)
Net foreign exchange differences	(5,827)	2,407
Cash and cash equivalents at beginning of year	207,660	241,021
Cash and cash equivalents at end of year	153,029	207,660

Non-cash items:
Lease additions and lease remeasurement	5,946	-
Outstanding payable on investments in property, plant and equipment	-	372

The accompanying notes are an integral part of the consolidated financial statements.

NOTES

Selected notes to consolidated financial statements

Note 1: General

a. The consolidated financial statements of PPHE Hotel Group Limited (the 'Company') and its subsidiaries (together the 'Group') for the year ended 31 December 2019 were authorised for issuance in accordance with a resolution of the Directors on 26 February 2020.

The Company was incorporated in Guernsey on 14 June 2007 and is listed on the Premium Listing segment of the Official List of the UK Listing Authority (the UKLA) and the shares are traded on the Main Market for listed securities of the London Stock Exchange. It is also a constituent of the FTSE 250.

b. Description of the Group business:

The Group is an international hospitality real estate group, which owns, co-owns and develops hotels, resorts and campsites, operates the Park Plaza® brand in EMEA and owns and operates the art'otel® brand.

The Group has interests in hotels in the United Kingdom, the Netherlands, Germany and Hungary, and hotels, self-catering apartment complexes and campsites in Croatia.

c. Assessment of going concern:

As part of their ongoing responsibilities, the Directors have recently undertaken a thorough review of the Group's cash flow forecast and potential liquidity risks. Detailed budgets and cash flow projections have been prepared for 2020 and 2021 which show that the Group's hotel operations will be cash generative during the period. The Directors have determined that the Company is likely to continue in business for at least 12 months from the date of the consolidated financial statements.

Note 2: Earnings per share

The following reflects the income and share data used in the basic earnings per share computations:

	Year ended 31 December
	2019 £'000	2018 £'000
Profit attributable to equity holders of the parent	33,915	38,052
Weighted average number of ordinary shares outstanding	42,391	42,335

Potentially dilutive instruments 211,518 in 2019 (2018: 189,428) had an immaterial effect on the basic earnings per share.

Note 3: Segments

For management purposes, the Group's activities are divided into Owned Hotel Operations and Management Activities (for further details see Note 14(c)(i)). Owned Hotel Operations are further divided into four reportable segments: the Netherlands, Germany and Hungary, Croatia and the United Kingdom. The operating results of each of the aforementioned segments are monitored separately for the purpose of resource allocations and performance assessment. Segment performance is evaluated based on EBITDA, which is measured on the same basis as for financial reporting purposes in the consolidated income statement.

		Year ended 31 December 2019
	The Netherlands £'000	Germany and Hungary £'000	United Kingdom £'000	Croatia £'000	Management and Central Services £'000	Adjustments* £'000	Consolidated £'000
Revenue
Third party	53,776	29,521	207,381	61,147	5,867		357,692
Inter-segment					38,384	(38,384)	-
Total revenue	53,776	29,521	207,381	61,147	44,251	(38,384)	357,692
Segment EBITDA	15,003	8,704	70,696	18,227	10,264	-	122,894
Depreciation, amortisation and impairment							(41,749)
Financial expenses							(32,089)
Financial income							2,923
Net expenses for liability in respect of Income Units sold to private investors							(10,795)
Other expenses, net							(2,885)
Share in result of joint ventures							178
Profit before tax							38,477

* Consist of inter-company eliminations.

The Netherlands
£'000

Germany and Hungary
£'000

United Kingdom
£'000

Croatia
£'000

Adjustments²

£'000

Consolidated
£'000

Geographical information

Non-current assets¹

202,673

97,195

840,130

178,928

30,761

1,349,687

¹ Non-current assets for this purpose consists of property, plant and equipment, right to use assets and intangible assets.

² This includes the fixed assets of Management and Central Services and the intangible fixed assets.

		Year ended 31 December 2018
	The Netherlands £'000	Germany and Hungary £'000	United Kingdom £'000	Croatia £'000	Management and Central Services £'000	Adjustments* £'000	Consolidated £'000
Revenue
Third party	49,569	31,443	195,092	60,193	5,185	-	341,482
Inter-segment	-	-	-	-	36,823	(36,823)	-
Total revenue	49,569	31,443	195,092	60,193	42,008	(36,823)	341,482
Segment EBITDA	14,091	5,242	65,006	18,558	10,275	-	113,172
Depreciation, amortisation and impairment							(35,903)
Financial expenses							(31,986)
Financial income							1,568
Net expenses for liability in respect of Income Units sold to private investors							(10,318)
Other income, net							9,706
Share in result of joint ventures							144
Profit before tax							46,383

* Consist of inter-company eliminations.

The Netherlands
£'000

Germany and Hungary
£'000

United Kingdom
£'000

Croatia
£'000

Adjustments²

£'000

Consolidated
£'000

Geographical information

Non-current assets¹

206,964

78,066

814,089

167,286

25,843

1,292,248

¹ Non-current assets for this purpose consists of property, plant and equipment and intangible assets.

² This includes the fixed assets of Management and Central Services and the intangible fixed assets.

Note 4: Related parties

Significant other transactions with related parties

a. Balances with related parties

	As at 31 December

	2019 £'000	2018 £'000
Loans to joint ventures	11,720	4,134
Short-term receivables	34	1,605
GC Project Management Limited	261	(372)

b. Transactions with related parties

	Year ended 31 December
	2019 £'000	2018 £'000
GC Project Management Limited	2,980	3,086
Interest income from jointly controlled entities	571	92

c. Significant other transactions with related parties

(i) Project Management Contracts - The Group actively engages in the development of properties into new hotels and the refurbishment and/or extension of its existing portfolio of hotels. The Group has contracted, and currently contracts, with GC Project Management Limited (GC), for project management services in respect of its projects. The Group entered into six project management agreements with GC in 2018 for its various projects. Each such agreement provides for a capped amount payable by the Group to GC in respect of each such project. Five projects Out of the six Project Management Contracts have been completed and as at 31 December 2019 only one project management Contract is still active.

(ii) Pre-Construction and Maintenance Contract - The Group frequently uses GC to undertake preliminary assessment services, including appraisal work, and provide initial estimates of the construction costs. Further, GC provides ad-hoc maintenance work when required to the Group's various sites. Accordingly, the Group has entered into an agreement with GC for the provision of pre-construction and maintenance services by GC to the Group for a fixed annual retainer of £60,000.

(iii) Transactions in the ordinary course of business, in connection with the use of hotel facilities (such as overnight room stays and food and beverages) are being charged at market prices. These transactions occur occasionally.

(iv) Compensation to key management personnel (Executive and Non-Executive Directors) for the year ended 31 December 2019:

	Base salary and fees £'000	Bonus	Additional remuneration	Retention award	Pension contributions £'000	Other benefits £'000	Total £'000
Chairman and Executive Directors	655	60	-	53	113	5	886
Non-Executive Directors	443	-	30		-	-	473
	1,098	60	30	53	113	5	1,359

Directors' interests in employee share incentive plan

As at 31 December 2019, the Executive Directors held share options to purchase 75,000 ordinary shares. 50,000 options were fully exercisable with an exercise price of £6.90 and 8,333 options were fully exercisable with an exercise price of £14.30. No share options were granted to Non-Executive members of the Board.

(vi) Compensation to key management personnel (Executive and Non-Executive Directors) for the year ended 31 December 2018:

	Base salary and fees £'000	Bonus	Retention award	Pension contributions £'000	Other benefits £'000	Total £'000
Chairman and Executive Directors	799	40	21	112	20	992
Non-Executive Directors	219	-	-	-	-	219
	1,018	40	21	112	20	1,211

PRINCIPAL RISKS AND UNCERTAINTIES

This year we have articulated some of our principal risks differently from the 2018 Annual Report. The table shows movement in the risk level against related prior year risks and also highlights any which are newly added.

We have removed foreign exchange rate fluctuations as a principal risk as we regard this to be a low risk area due to our approach of matching our commitments, cash flow and debt in the same currency. We continue to monitor the risk and would forward hedge any sizeable cash flows should any future transactions occur which are not in a functional currency of the Group.

The prior year risk relating to capital requirements to maintain product standards has been removed this year as it is considered to be a well mitigated, low risk area.

Similarly, the extent of our fixed operating expenses and vulnerability to short-term changes in revenue no longer features as a separate area of principal risk, but remains closely linked to the principal risks of a downturn in the economic cycle and changing market dynamics.

We also removed the key partnership risk relating to our licence agreement with Radisson Hotel Group (RHG) to operate or sub-license the Park Plaza brand within the EMEA region. We consider the benefits of the partnership to far outweigh any related risks. We continue to monitor the risk but consider it to be low and aligned with our current risk appetite.

Strategic Agenda references

1). Disciplined, focused capital deployment

2). Optimise the value of the existing portfolio

3). Extract value from portfolio to fund further growth

4). Long-term sustainability

5). Consistently deliver the refreshed intended guest experience across our properties

6). Maintain high operating margins

· Unchanged

· Reduced

· Increased

Risk Priority: Our risk priority is decided through an assessment of the likelihood of the risk and its impact should it materialise.

Our assessments are weighted towards impact to encourage prioritisation of high impact risks.

The table below represents our risk priorities for the year ahead. We believe these to be the most significant threats to the achievement of our objectives but are not an exhaustive list of all risks identified and monitored through our risk management process.

INVESTMENT

Principal Risk Description

Risk Priority

Risk Response and Outlook for 2020

Funding

The Group could experience a breach of debt covenants leading to cash restrictions, loss of stakeholder confidence, less favourable terms when refinancing in the future and a potential going concern threat.

Strategic objectives under threat:

3). Extract value from portfolio to fund further growth

2). Optimise the value of the existing portfolio

4). Long-term sustainability

Medium

(Reduced)

Our strategic approach of using debt to partly finance our property investments and enhance returns demonstrates an appetite to accept a measured level of funding related risk. This is aligned with our risk-reward approach with assets typically ring fenced into single or group facilities and maximum loan to value ratios of between 50% and 65% depending on location.

See page 57 of the Annual Report and Accounts 2019 for details

We have reduced our assessment of this risk as we closely monitor and forward test to ensure compliance with debt covenants and other covenants in the loan facilities. We nurture the long term relationships we have with our funding banks and ensure we have cash reserves to enable us to respond quickly to any potential breaches if these were to occur.

We perform forward covenant testing on a monthly basis. The forward testing applies sensitivity and stress modelling. On a semi annual basis the working capital model is updated. The model was developed in order to assess the Company's viability over a period of three years using stress tests which include, amongst others, reduction of average room rate, occupancy and EBITDA margins and the effect that those would have on the loan covenants and our cash flow. The model is reviewed by the Board on an annual basis.

Outlook for 2020

We continually monitor this risk closely to optimise returns while remaining at comfortable leverage levels.

Development Projects

Through the delivery of our development pipeline, we could experience delays, unforeseen increase in costs, disputes with contractors or inconsistent quality.

Any of these could reduce cash flow, profitability and stakeholder confidence.

Strategic objectives under threat:

1). Disciplined, focused capital deployment

2). Optimise the value of the existing portfolio

4). Long-term sustainability

High

(increased)

The successful delivery of our development pipeline is fundamental to the achievement of our strategic objectives. With several significant projects in our development pipeline the profile of this risk has increased for the year ahead.

Our key projects are subject to ongoing senior leadership team oversight and close monitoring and support from our in-house Technical Services team.

Regular meetings with our key contractors are held to identify and tackle approaching issues which could impact the overall cost, targeted delivery schedule or the expected quality standards.

Outlook for 2020

Our diligent approach to development project delivery continues in 2020.

With several significant projects underway or planned, we continue to review our approach and resource requirements in respect of centralised project management.

INVESTMENT

Principal Risk Description

Risk Priority

Risk Response and Outlook for 2020

Acquisitions and New Developments

Market changes or inaccurate assessments of development opportunities could lead to poor investment decisions and impact our ability to drive growth and long-term value.

Strategic objectives under threat:

1). Disciplined, focused capital deployment

3). Extract value from portfolio to fund further growth

Medium

(Newly Reported)

Through the application of our due diligence procedures we are informed, calculated risk in pursuing new opportunities, which is aligned with our strategic agenda of disciplined, focused capital deployment to achieve growth and long-term value.

Outlook for 2020

This risk is currently within our levels of tolerance and continues to be managed to remain closely aligned with our approach to risk and reward.

MARKET AND MACRO ENVIRONMENT

Principal Risk Description

Risk Priority

Risk Response and Outlook for 2020

Economic Climate

A downturn in the economic cycle could

lead to margin erosion due to falling revenues and/or increasing costs. Uncertainty regarding macro-economic and socio-political conditions including the future impact of Brexit, could affect

our ability to maintain or increase revenue and profitability.

Strategic objectives under threat:

6). Maintain high operating margins

4). Long-term sustainability

High

(unchanged)

As referred to in the emerging risk section of this report, we have performed scenario planning for different economic cycles and developed response plans to best protect our margins in a downturn. We have also assessed and planned for the potential impact of the UK exit arrangements from the EU.

Outlook for 2020

Continued political and economic uncertainty means we must be prepared for the possibility of a downturn in the economic cycle to emerge in 2020. While the risk is largely outside of our control, we continue to monitor the economic climate closely to ensure that we continue to be well placed to respond to changing conditions.

Market Dynamics

The travel industry could continue to change considerably with increased competition driven by the influence of major booking platforms, consolidation in the hotel market, increase in home market rentals and other disruptors.

Additionally a failure to adapt to changing guest expectations in respect of technology, sustainability and service could threaten our ability to retain and grow market share.

Strategic objectives under threat:

4). Long-term sustainability

5). Consistently deliver the refreshed intended guest experience across our properties

6). Maintain high operating margins

Medium

(unchanged)

The ever-changing nature of the hospitality industry means we closely monitor trends and developments within the sector, giving us the ability to react quickly. We also continue to use guest survey and guest review monitoring software to focus on recognising guest feedback, engaging with guests and enhancing our guest experience. To further improve our performance, we introduced a dedicated customer service team to manage these activities.

Our exclusive and perpetual licence with RHG provides us the benefits of scale, negotiating power and market knowledge. During 2019 we worked in collaboration with RHG on the development of its main new website, app and reservation system.

Our Responsible Business strategy considers how we monitor and respond to guest expectations regarding matters of sustainability.

(see pages 80 to 87 of the Annual Report and Accounts 2019)

Outlook for 2020

As an externally driven area of risk, changing market dynamics will always be a threat to our existing business model.

To continue to meet guest expectations and control this risk as best as possible we are continuing several ongoing activities in 2020 which includes the continued progress against our three-year technology road map and the delivery of our Responsible Business strategy.

TECHNOLOGY AND INFORMATION SECURITY

Principal Risk Description

Risk Priority

Risk Response and Outlook for 2020

Cyber Security

The Group could be subject to a serious cyber attack resulting in significant disruption to operations and financial loss from falling revenues, cost of recovery and significant fines in the event of a related data breach.

Strategic objectives under threat:

4). Long-term sustainability

5). Consistently deliver the refreshed intended guest experience across our properties

High

(unchanged)

As one of the most significant risks to the business, there has been focus throughout 2019 on strengthening our defence against cyber attacks, including improved technical controls and enhanced awareness of the threats within our teams.

We introduced improved email protection to combat the threat of phishing scams and added new endpoint protection and detection controls.

We also commissioned external consultants to perform several penetration tests to highlight security weaknesses and help prioritise mitigating actions.

Outlook for 2020

Although we accept that this risk is likely to remain high, we continually work to further protect our business from the likelihood of a severe threat materialising.

A number of projects are underway which will see controls strengthened in respect of network access control and security incident & event management.

We will continue to further enhance our team members' awareness of information security with the roll-out of online training.

The threat of cyber attack could also arise through the targeting of our third party partners and suppliers. Further assessment of this particular threat and review of third party security measures will continue to be an area of focus in the year ahead.

Data Privacy

The Group could experience a serious

data privacy breach which could result

in investigation by the regulator, significant fines in accordance with the GDPR and subsequent reputational damage.

Strategic objectives under threat:

4). Long-term sustainability

5). Consistently deliver the refreshed intended guest experience across our properties

High

(unchanged)

We are committed to protecting the personal data of our employees and guests. As with 2018, we continued to invest in team member awareness and tailor our processes and services to best mitigate the inherent personal data processing risks.

The 2019 investment in strengthening our defence against cyber attack and the provision of a secure environment for all of the personal data that we process has enhanced our control environment.

Alongside our Information Security and Data Privacy policies, there are established breach protocols, reporting hotlines for team members and incident response plans. We also engage with third party experts for technical support when necessary.

Outlook for 2020

The nature of our operations means the risk of a serious data privacy breach is likely to remain a significant threat and a high priority.

To further embed our approach to GDPR compliance during the year, we are continuing to review and strengthen our procedures and internal awareness to counter this threat.

Technology Resilience

A prolonged failure in our core technology infrastructure could present a significant threat to the continuation of our business operations, particularly where failures impact hotel management and reservation systems.

Strategic objectives under threat:

4). Long-term sustainability

5). Consistently deliver the refreshed intended guest experience across our properties

High

(unchanged)

During 2019 we performed a review of IT Business Continuity and assessed current backup and recovery arrangements for all critical systems. Through this review, we identified a number of options for strengthening the resilience of our core infrastructure.

Outlook for 2020

We are currently and will continue strengthening our technology infrastructure throughout 2020 and mitigate this risk providing suitable levels of protection and built-in redundancy for our core systems.

SAFETY AND CONTINUITY

Principal Risk Description

Risk Priority

Risk Response and Outlook for 2020

Food Safety

The Group could experience significant food safety or allergen related incidents through failings in food preparation, storage or our supply chain.

A serious incident could damage our reputation and lead to falling revenue.

Strategic objectives under threat:

4). Long-term sustainability

5). Consistently deliver the refreshed intended guest experience across our properties

High

(Newly Reported)

The health and well-being of our guests is a key priority and fundamental to our success. To monitor performance against our expected high standards, we engage third party food safety experts to conduct a thorough in-house and supplier

audit programme.

Continued consolidation of our food supply chain during the year has allowed us to strengthen our control with improved supplier visibility and audit coverage.

Outlook for 2020

Although we acknowledge food safety to be a high inherent risk area within the hospitality sector, our focus continues on minimising the likelihood of

incidents occurring.

In particular, we continue to review the strength of our communications in respect of allergens and improve on team member training and awareness.

Physical Security and Safety

Physical security and safety incidents at one or more of our properties could jeopardise the safety of our guests and team members as well as disrupt operations severely.

Although the prime city centre location of many of our properties is a strategic strength, it also heightens the inherent risk of security threats. A failure to take reasonable steps to prevent serious security or safety incidents, or a failure

to respond appropriately, could impact our reputation and result in significant loss of guest and stakeholder confidence.

Strategic objectives under threat:

4). Long-term sustainability

5). Consistently deliver the refreshed intended guest experience across our properties

Medium

(Newly Reported)

Security and fire safety procedures are in place at all of our managed properties, including emergency evacuation plans. Our dedicated security, health and safety teams perform regular risk assessments and develop response plans in respect of significant threats to the physical security and safety of our guests and team members.

We also maintain established Crisis Plans across all of our properties, which are reviewed, tested and communicated to management regularly.

Outlook for 2020

The safety and security of our guests and team members will remain a priority at all times. We continue to monitor threats, maintain our standards and strive for continual improvement.

Operational Resilience

We could experience disruption to our operations from incidents at our hotels or in the immediate vicinity, for example floods, extreme weather, social unrest, terrorism.

As the current Coronavirus outbreak evolves it could present a temporary threat to the continuity of our services and operations.

Strategic objectives under threat:

4). Long-term sustainability

5). Consistently deliver the refreshed intended guest experience across our properties

Medium

(Newly Reported)

To respond appropriately to external incidents which threaten the continuity of our operations, there are established Crisis Plans and longer-term Business Continuity Plans in place for each of our hotels.

Although the extent of impact to our operations is dependent on the severity of an incident and largely outside of our control, our ability to respond quickly and our insurance coverage can minimise the financial impact.

Outlook for 2020

We continue to monitor the Coronavirus outbreak closely and conduct ongoing reviews of our response plans and measures.

Throughout 2020, we will continue strengthening our Business Continuity and Crisis Plans with particular focus on critical roles and operational areas.

PEOPLE

Principal Risk Description

Risk Priority

Risk Response and Outlook for 2020

Availability of Labour in the UK

Changes in demographics and migration could result in a reduction in available labour. The UK's departure from the EU is likely to accelerate this threat.

Difficulties in recruiting and retaining team members could damage profitability through

increased people costs and/or falling revenues following a negative impact on service.

Strategic objectives under threat:

5). Consistently deliver the refreshed intended guest experience across our properties

6). Maintain high operating margins

High

(Increased)

We continue to manage this significant threat proactively with several initiatives in place or underway.

In London, we acquired property for the development of employee accommodation to drive attraction and retention of hotel workers.

Our housekeeping in London is managed in-house by our Accommodation Services team, giving us greater control in recruiting, retaining and growing our own people while improving the guest experience.

We promote flexible working hours for relevant roles and provide guaranteed hours and greater job security.

We have also increased our focus on talent development and invested more in developing people and new technology.

To attract talent, we have built a new careers website (launching early 2020), engaged with schools to build early engagement and continued with our apprenticeships programme within the UK.

We also work with selected partners to reach out to the communities in which we operate.

Outlook for 2020

The influence of the political, economic and social environment means the availability of labour is likely to continue to remain a high priority risk area.

We continue to address this risk through longer term workforce planning, improving our attractiveness as an employer and targeted retention strategies.

DIRECTORS' RESPONSIBILITY STATEMENT

Each of the directors named below confirms to the best of his or her knowledge that:

(i) the consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and

(ii) the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face, and provides information necessary for shareholders to assess the Company's performance, business model and strategies.

The Directors consider that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

· Eli Papouchado

· Boris Ivesha

· Daniel Kos

· Dawn Morgan

· Kenneth Bradley

· Kevin McAuliffe

· Nigel Keen

· Nigel Jones

Signed on behalf of the Board by

Boris Ivesha, President & Chief Executive Officer

Daniel Kos, Chief Financial Officer & Executive Director

27 February 2020

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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PPHE Hotel Group Ltd (PPH)

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Airtel Africa left investors underwhelmed despite customer growth, Robinson’s share price jumps on profit upgrade and Harbour Energy nudges higher on trading update.

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