Interim Results

RNS Number : 8515X

PPHE Hotel Group Limited

01 September 2022

1 September 2022

PPHE Hotel Group Limited

("PPHE" or the "Group")

Unaudited Interim Results for the six months ended 30 June 2022

Good recovery across all regions, shareholder returns recommenced

PPHE Hotel Group, the international hospitality real estate group which develops, owns and operates hotels and resorts, announces its unaudited interim results for the six months ended 30 June 2022 (the "Period").

Financial highlights

· Total revenue was up 339.4% year-on-year at £113.2 million (H1 2021: £25.8 million), which represented 73% of the pre-pandemic levels reported in H1 2019. Quarter-on-quarter momentum in the Period saw Q2 2022 trading at 87.5% of Q2 2019 levels compared with 51% of these levels in Q1 2022.

· Revenue growth was driven by both strong rate growth as well as a good recovery in occupancy rates. Average room rate was £141.1, up 48.2% compared with H1 2021 and up 16% on H1 2019. Occupancy grew to 48% compared with 12.8% in H1 2021 and 76.8% in H1 2019.

· EBITDA improved to £17.0 million compared to an EBITDA loss of £14.0 million in H1 2021, driven by the recovery in demand. Notwithstanding the labour market constraints, wage inflation and Group-wide reopening programme, EBITDA margins are improving year-on-year.

· EPRA NRV per share* at 30 June 2022 was £21.88 (31 December 2021: £22.15), a slight year-on-year reduction due to the reported loss for H1. Revaluations will be completed at the year end, as per usual course of business.

· The strength of recovery across the Group's key markets and the resilience of its financial performance has allowed for the re-instatement of the interim dividend at 3 pence per share (H1 2021: nil) and the commencement of a share buyback programme in June 2022.

^(*) EPRA NRV and EPRA NRV per share were calculated based on the independent external valuations prepared in December 2021.

Operational highlights

· All our key markets delivered strong growth, with the UK leading the way as it benefited from the earlier lifting of pandemic restrictions compared with other markets. The Netherlands, Germany and Croatia have shown increasingly strong recoveries as the months progressed and restrictions were lifted.

· A significant rebound in leisure travel demand throughout the Period. Corporate demand activity is also increasing, and the Group is experiencing steadily increasing demand for meetings and events spaces.

· The Group's commercial focus during this recovery period has been rate-led rather than occupancy-led, which resulted in very strong average room rate performance across all operating markets, at 16% ahead of pre-pandemic levels in H1 2019. There was also a strong year-on-year improvement in occupancy across the portfolio.

· This rate-led approach has allowed the Group to better navigate the challenging cost environment that continues to impact the whole industry, including in the labour market where wage inflation remains.

· The Group has also proactively mitigated rising costs through the successful delivery of a number of internal initiatives which have helped to protect margins. For example, rising energy costs have been mitigated for this financial year through prudent hedging action.

Strategic highlights

· Significant extension of long-standing and successful partnership with Radisson Hotel Group. This expansion will allow both PPHE and Radisson to further leverage their respective brand strengths. For PPHE, this will allow further diversification of market segments, increase growth prospects for Park Plaza and art'otel in multiple new territories, and generate fee-based income.

· Grand Hotel Brioni Pula was relaunched as a Radisson Collection Hotel, the first PPHE hotel to operate and market under this new partnership.

· Good progress continues to be made across the Group's development pipeline, including all art'otel projects which remain on track across London Hoxton (opening H1 2024), London Battersea Power Station (opening in late 2022), Zagreb (opening in Q2 2023) and Rome (opening H2 2023).

· Strategic recruitment and talent attraction initiatives implemented in FY2021, along with our committed approach to training and upskilling, have resulted in strong recruitment and retention of team members across the Group despite wider sector challenges and shortages. This helped the Group to rapidly reopen hotels and ramp up operations when restrictions lifted.

· Joined Zero Carbon Forum which will aid the Group in formulating its strategy and targets to achieve net zero status.

Current trading and outlook

· July and August total revenues above 2019 same period, mainly driven by strong room rate performance, albeit mainly leisure driven.

· Forward booking pace continues to be solid, with growing numbers of bookings in the corporate, meetings and events segment.

· Industry wide inflationary pressures remain, particularly around energy prices, creating margin headwinds into 2023.

· Room-rate strategy and further investments in technology, automation and energy efficiency partly mitigating cost pressures.

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

"We are pleased to report a strong first half performance, which has been achieved by our exceptional teams despite the challenging backdrop. As COVID restrictions have been lifted across all of our markets, leisure demand has rebounded strongly due to pent-up demand for travel, and our best-in-class properties have been well-positioned to benefit from this trend. As a result, we are able to recommence shareholder returns by way of an interim dividend and share buyback programme.

In the UK, we have continued to see a strong recovery in activity across our portfolio particularly in London, where meetings and events enquiries are also ramping up following the previous period of inactivity due to COVID. Since restrictions across our other regions have lifted, it has been encouraging to see business demand across our markets returning.

We continue to deliver on our development pipeline and were delighted to open Grand Hotel Brioni Pula in the Period, as a Radisson Collection Hotel. It is our first hotel under our new strategic partnership with Radisson Hotel Group, with whom we maintain a strong and long-standing relationship.

Whilst macroeconomic challenges remain, our attractive portfolio, strong financial position and excellent team leave us well-placed to take advantage of the continued recovery across our regions."

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 Charlotte Cobb / Nick Moore	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 1.8 billion portfolio, valued as at December 2021 predominately 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 portfolio includes 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. The Group's strategy is to grow its portfolio of core upper upscale city centre hotels, leisure and outdoor hospitality and hospitality management platform.

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 a Guernsey registered company with shares listed on the London Stock Exchange. 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.artotel.com

www.arenahotels.com

www.arenacampsites.com

BUSINESS & FINANCIAL REVIEW

BUSINESS REVIEW

In the first six months the Group delivered strong year-on-year revenue and EBITDA growth following the easing of the remaining COVID-19 restrictions in the first quarter across the Group's operating markets. This led to a very swift return in bookings driven by strong pent-up demand, particularly in Q2, and predominantly from leisure guests with the corporate market following.

As a result, total revenue in the Period increased by 339.4% to £113.2m, representing 73% of the pre-pandemic level reported in H1 2019. In addition, quarter-on-quarter momentum in the Period saw Q2 2022 trading at 87.5% of Q2 2019 levels, which compared with 51% of these levels in Q1 2022. The Group also returned to a positive operational profit in H1 with EBITDA at £17.0 million, compared with an EBITDA loss of £14.0 million in H1 2021. This positive EBITDA was fully attributable to the second quarter of the year, where the first quarter was still loss making due to COVID restrictions in our operating markets.

The UK, our largest market, was the first to lift restrictions and has continued to perform particularly strongly, followed by an uplift in activity in The Netherlands, Germany and Croatia from May onwards. Across our operating markets, booking momentum continued to build throughout Q2, which resulted in higher occupancy rates during the weekends in particular, with mid-week occupancy also solid. We also saw a gradual return of corporate activity and demand for meetings and events spaces in Q2, particularly in London. The growing numbers of enquiries we are having around meetings and events bookings gives the Group confidence in the continued recovery of this segment.

Across our operations we have adopted and maintained a disciplined rates-led strategy which has helped mitigate against cost inflation and the challenging labour market. We are pleased that this strategy has been successful, with strong average room rates achieved across all our regions, and with no discernible impact on demand or activity across our portfolio as a result. In the Period, average room rates were up 48.2% compared with H1 2021, and up 16% on pre-pandemic levels reported in H1 2019. Notably, the average room rate in all our operating regions exceeded those achieved in 2019, with average room rates during Q2 up 18% on Q2 2019.

The Group is not immune to the widely reported inflationary pressures, such as increased energy and supply costs and the ongoing tightness in the labour market, which are present to differing extents across all our operating markets and across our industry as a whole. We continue to take mitigating measures to protect our margins as a result of this, including investments in our digital technologies and automated processes as well as in central procurement and sustainability, designed to reduce energy consumption across our operations. In addition, we have started to see the benefits of our strategic approach and initiatives to staff recruitment and attraction, in response to continued challenges in the labour market. This includes driving our position as an employer of choice as well as focusing on the central resourcing of team members across the business. These efforts, alongside our dedicated approach to training and upskilling, have resulted in solid recruitment and retention across the business despite continued sector wide labour shortages.

Despite these macroeconomic headwinds, we continued to make good progress within our exciting development pipeline in the first half. This included the opening of Grand Hotel Brioni Pula in Croatia and progress in the construction of our flagship property art'otel London Hoxton. More information is included later in this statement.

Recommencement of shareholder returns

In light of this positive trading momentum and given the Group's strong balance sheet, the Board has declared an interim dividend of 3 pence per Ordinary Share. This is further to the announcement on 29 June in which we stated the Board's intention to consider a modest interim dividend at or around the time of the interim results, and is further to the share buyback programme also announced.

Further details are set out below and in the Financial Performance, and the Review of Operations.

Extension of strategic partnership with Radisson Hotel Group

In May 2022, the Group announced an extension to its longstanding strategic partnership with Radisson Hotel Group ("RHG"). PPHE has been instrumental in the expansion of the Park Plaza brand in Europe through the Group's exclusive and perpetual territorial licence of the RHG-owned Park Plaza brand in Europe, Middle East and Africa.

Through the extended partnership, which builds on a successful 20-year relationship, PPHE will have access to and be able to leverage the full suite of RHG's brands including Radisson Collection, Radisson Blu and Radisson RED, allowing for greater product and market segment diversification. At the same time, RHG will benefit from access to the art'otel and Park Plaza brands in certain regions, which are primarily outside of the Group's core markets and subject to development targets. Through this arrangement, PPHE is entitled to receive a fee-based income for the use of these brands and portfolio growth will lead to greater traction and brand awareness.

As a result of this PPHE was delighted to launch its first hotel under the new partnership arrangement. Grand Hotel Brioni Pula opened as a Radisson Collection Hotel, Radisson Hotel Group's premium style collection of luxury hotels that offer quality services, dining and wellness.

Development pipeline

Progress has continued in the Group's £200+ million development pipeline.

Ahead of the summer season, the Grand Hotel Brioni Pula opened in May as a Radisson Collection Hotel following a two-year c.£30 million repositioning project. The hotel has been completely redeveloped into a premium luxury property offering 227 rooms, an infinity pool, indoor pool and extensive health and wellness facilities and several restaurants and bars.

Grand Hotel Brioni is one of three premium hotels to open in Croatia, with an art'otel in Zagreb and Riviera Pula set to open in 2023.

In the UK, construction of another of the Group's flagship properties, art'otel London Hoxton, is progressing well and remains on track. The hotel's 'topping out' is set to complete in the second half of 2022 and the hotel is expected to open in H1 2024.

Elsewhere in the UK, planning progress continued for two further development projects, including a mixed-use for a hotel at 79-87 Westminster Bridge Road. The Group will provide an update on these in due course.

Furthermore, the UK's first art'otel London Battersea Power Station is expected to open later this year and will be operated by PPHE under a management agreement through the Group's hospitality operating platform. In June, we announced the appointment of Jaime Hayon as the interior designer and signature artist for the property, and we are delighted that two Michelin-starred chef Henrique Sa Pessoa will be leading the art'otel London Battersea Power Station restaurant when it opens. Located within the Battersea Roof Gardens, the hotel will feature 164 bedrooms, a skyline destination restaurant and bar, rooftop swimming pool, as well as a gym, spa, event facilities, a grand café and art gallery.

Finally, in Italy, we have commenced a £15.0 million redevelopment project of our recently acquired hotel in the centre of Rome, Hotel Londra and Cargill in Rome, which was acquired in November 2021. The hotel closed on 1 July to undergo a redevelopment project to transform the property into an upper upscale lifestyle art'otel. The hotel is expected to reopen during H2 2023.

Governance and Executive Leadership team

Governance : The composition of the Board has remained stable since 2020. Continuity at Board level during the COVID-19 period has been key to delivering value for shareholders. The Board also recognises that it is important to avoid 'groupthink' by ensuring diversity and independence of Directors, and is therefore in the process of recruiting a further non-executive director. We have appointed an independent specialist search consultancy to this end. In advance of new requirements on reporting Board diversity, the Nomination Committee has also reviewed and updated the Board Diversity Policy.

The 2022 AGM saw the Group hold its first advisory vote on the remuneration report. The advisory vote on the remuneration report will be an annual agenda item for General Meetings. Formal notification to shareholders of these advisory votes will appear in the AGM notice. We have introduced an ESG-related performance target for the assessment of the Group's executive leadership team to ensure they are adequately incentivised to drive the Group's ESG agenda .

Environmental, Social and Governance ("ESG")

Stakeholder engagement: The Company has engaged a specialist consultancy to engage with key stakeholders to deliver a materiality assessment. Investors, customers, affiliates, suppliers, local communities and team members are inputting their ESG priorities, which will form the foundation of the Group's new ESG strategy.

Carbon & energy : The Group has upgraded systems to permit detailed, half-hourly reporting on energy consumption. The data available from this upgrade enables identification of unusual or excessive energy usage, and implementation of solutions to reduce it. The first steps in eliminating gas from the energy supply-chain are being taken at Park Plaza London Victoria, where a £2 million investment project to replace heating and cooling equipment will take place. In addition, the scope of the Group's repositioning programme of its property in Rome includes redevelopment according to the highest energy standards including the removal of gas from the energy supply chain.

The Group has also joined the Zero Carbon Forum and Energy and Environment Alliance: industry groups to help us on our journey to reaching net zero. The Zero Carbon Forum is assisting us in establishing our Scope 3 baseline data, which will feed into our net zero targets. The Energy and Environment Alliance assists its members in assessing the sustainability of the design, construction and management of hotels and other hospitality assets using Building Research Establishment Environmental Assessment Method ("BREEAM") methods.

Sustainable development : In the UK, the Group remains on-target to achieve an 'Excellent' BREEAM sustainability rating for art'otel London Hoxton and the property will not use any gas for energy supply (except for minimal use in the kitchens for burners).

Our People : The Group has continued to prioritise attracting and retaining team members. In January 2022, the Hospitality Career Centre opened in Park Plaza London Victoria. This project was established to enable the recruitment team to attract external talent in an accessible manner at a time when there is acute pressure on recruitment and labour supply across the hospitality industry.

Our Places : In the Netherlands, the Group is responding to the Ukraine refugee crisis by providing accommodation for 140 Ukrainian refugees at Park Plaza Amsterdam Airport. Donating old furniture to the nursing home charity, Cordaan Woonzorgcentrum reduces waste and increases upcycling. Partnerships with local schools offer employment opportunities to school leavers, ensuring the Group's objective of serving local communities is met.

Current trading and outlook

Trading across the Group in July and August has seen continued momentum from Q2. These months are typically leisure driven, supported by the summer holiday season. Trading has exceeded 2019 levels, with our July performance in particular driven by the UK and August by the strong summer across our Croatian properties. The growing numbers of enquiries and bookings by corporate guests also gives the Board confidence in a recovering corporate market in September and beyond.

Despite the positive recovery in demand and continued strength of forward bookings which we have seen build throughout the year to date, and the success of our rates-led strategy, the external demand outlook remains uncertain. Whilst we have not seen an impact in forward demand at the date of this interim report, we are mindful that cost of living pressures across all of our markets could impact the demand for travel. Nonetheless, our hotel portfolio is well positioned in terms of the consumer segments targeted, destination attractiveness and local room supply constraints. As a result, we expect our portfolio to continue to regain momentum through the remainder of the year but remain cautious as to the possible impact of the macro-economic backdrop.

On costs, our industry has been and will continue to be impacted by material external cost pressures, most notably energy costs and the combination of wage inflation and tight labour supply. These are unavoidable and whilst we have been successful with a range of mitigating measures and initiatives so far, we do expect these pressures to continue to constrain our margins over the medium term.

Notwithstanding these uncertainties, the Board remains confident around the Group's ability to make continued positive long-term progress. The quality of the portfolio and development pipeline and the strength of our performance to date provide a high degree of optimism in our ability to deliver returns to our shareholders over the medium term.

We will update shareholders further at our Q3 trading update, which is expected in late October 2022.

FINANCIAL PERFORMANCE

	H1 Reported in GBP (£)
	Six months ended 30 June 2022	Six months ended 30 June 2021	Change¹	Six months ended 30 June 2019	Change¹
Total revenue	£113.2 million	£25.8 million	339.4%	£155.3 million	(27.1)%
Room revenue	£82.0 million	£13.7 million	500.4%	£109.1 million	(24.9)%
EBITDAR	£18.2 million	£(12.8) million	N/A	£46.5 million	(61.0)%
EBITDA	£17.0 million	£(14.0) million	N/A	£45.7 million	(62.7)%
EBITDA margin	15.0%	(54.4)%	6,940 bps	29.4%	(1,440) bps
Reported PBT	£(26.1) million	£(50.3) million	N/A	£4.3 million	N/A
Normalised PBT	£(23.9) million	£(48.9) million	N/A	£5.5 million	N/A
Occupancy	48.0%	12.8%	3,520 bps	76.8%	(2,870) bps
Average room rate	£141.1	£95.2	48.2%	121.7	16.0%
RevPAR	£67.8	£12.2	455.1%	93.4	(27.4)%

¹ Percentage change figures are calculated from actual figures as opposed to the rounded figures included in the above table.

	Q2 Reported in GBP (£)
	Three months ended 30 June 2022	Three months ended 30 June 2021	Change¹	Three months ended 30 June 2019	Change¹
Total revenue	£81.2 million	£20.4 million	297.6%	£92.8 million	(12.5)%
Room revenue	£59.4 million	£11.1 million	437.3%	£65.7 million	(9.5)%
EBITDAR	£22.6 million	£(3.4) million	N/A	£33.7 million	(32.9)%
EBITDA	£22.0 million	£(3.9) million	N/A	£33.8 million	(35.0)%
EBITDA margin	27.1%	(19.2)%	4,620 bps	36.4%	(940) bps
Occupancy	58.8%	17.5%	4,130 bps	77.1%	(1,830) bps
Average room rate	£148.9	£102.6	45.1%	126.1	18.0%
RevPAR	£87.5	£18.0	387.0%	97.2	(10.0)%

¹ Percentage change figures are calculated from actual figures as opposed to the rounded figures included in the above table.

H1 saw a strong rebound in activity across all of the Group's key markets, particularly in the UK. This trend continued consistently through the first half.

This recovery across our regions, driven by pent-up demand for leisure stays, helped to deliver a reported total revenue of £113.2 million, an increase of 339.4% compared with the prior year (H1 2021: £25.8 million).

In the first half RevPAR increased by 455.1% to £67.8, driven by a 48.2% increase in average room rate to £141.1 (H1 2021: £95.2), as the Group maintained its disciplined rates-led strategy across its operations. Occupancy rose by 3,520 bps to 48.0% (H1 2021: 12.8%). Notably, average room rate in the Period was 16% ahead of the same period pre-pandemic (H1 2019: £121.7).

In Q2 average room rate increased to £148.9, 45.1% higher than the prior year and 18% higher than the rates achieved in Q2 2019. Occupancy rose by 4,130 bps to 58.8% (Q2 2021: 17.5%). This delivered Q2 RevPAR of £87.5 (Q2 2021: £18.0, Q2 2019: £97.2).

Group reported EBITDA in the Period increased to £17.0 million (H1 2021: EBITDA loss of £14.0 million, H1 2019: £45.7 million) and the EBITDA margin improved to 15.0% (H1 2021: (54.4)%, H1 2019: 29.4%).

Reconciliation of reported profit before tax to normalised profit before tax

In £ millions	Six months ended 30 June 2022	Six months ended 30 June 2021	12 months ended 30 June 2022	12 months ended 31 December 2021
Reported profit (loss) before tax	(26.1)	(50.3)	(33.4)	(57.6)
Loss on buy back of units in Park Plaza Westminster Bridge London from private investors	0.7	-	1.3	0.5
Settlement of legal claim	-	-	3.1	3.1
Loan early prepayment break costs	-	0.6	(0.1)	0.5
Revaluation of finance lease	1.8	1.7	3.6	3.6
Revaluation of Park Plaza County Hall London Income Units	-	-	(0.6)	(0.6)
Disposals and Other non-recurring expenses (including pre-opening expenses)	1.0	(0.9)	1.2	(0.7)
Impairment of property, plant and equipment and right-of-use assets	-	-	4.4	4.4
Business combination acquisition costs	-	-	1.0	1.0
Revaluation of share appreciation rights	1.4	-	(0.3)	(1.7)
Fair value IRS	(2.7)	-	(2.7)	-
Normalised profit (loss) before tax	(23.9)	(48.9)	(22.5)	(47.5)

Funding and liquidity

As at 30 June 2022, the Group had £203.2 million cash available (31 December 2021: £213.6 million) consisting of a consolidated cash position of £126.0 million (31 December 2021: £136.8 million) and further access to undrawn facilities of £77.2 million (31 December 2021: £76.8 million), which includes the £40 million undrawn amount under the CLBILS facility, the £20 million undrawn amount under the Park Plaza London Waterloo facility and €20 million undrawn amount under the working capital facility entered by the Group's Croatian subsidiary Arena Hospitality Group (''Arena'') on 20 September 2021.

Given the recent interest rate fluctuations in the market, the Group decided to enter into a few forward interest rate swap agreements to hedge its future variable interest exposure. The first agreement relates to the £180 million facility with Bank Hapoalim B.M to fund the development of art'otel London Hoxton, which is now fixed from the opening date until maturity of the facility in April 2030. Two further forward interest rate swap agreements were entered into in order to partially hedge the interest rate exposure of the outstanding the loans that are expected to be refinanced in June 2026. Details of these agreements are set out in Note 3 below.

Dividend

In light of the continued recovery of our key markets, with stronger demand across the Group, the Board has declared an interim dividend of 3 pence per share in respect of the six months ended 30 June 2022. This is payable to all shareholders who are on the register as at 16 September 2022 and will be paid to qualifying shareholders on 14 October 2022.

The Board recognises the importance of returning capital to shareholders and was pleased to be able to recommence capital returns during H1 2022. Given the current momentum the Group is experiencing, the Board is hopeful it will be able to continue to grow shareholder distributions to 2019 levels over the medium term. However, given the current macro-economic uncertainty and inflationary environment, the Board does not feel it is currently appropriate to re-implement a definitive dividend policy at this point in time. We have a history of returning capital to shareholders and are committed to reinstating a dividend policy when prudent to do so.

EPRA accounting information

The Group is a developer, owner and operator of hotels, resorts and campsites and realises returns through both developing and owning assets as well as the operations of those assets to their full potential. Certain EPRA performance measurements are disclosed to aid investors in analysing the Group's performance and understanding the value of its assets and earnings from a property perspective.

EPRA performance indicators

The Group's last 12 months adjusted EPRA earnings per share to 30 June 2022 improved to 1 pence per share. A summary of the Group's EPRA performance measures is set out in the table below.

	30 June 2022 £ million	31 December 2021 £ million
EPRA earnings (LTM)¹	3.4	(17.5)
Adjusted EPRA earnings (LTM)¹	0.6	(18.8)
EPRA NRV²	945.8	951.2

Per share figures:	30 June 2022 £	31 December 2021 £
EPRA Earnings per share (LTM)	0.08	(0.41)
Adjusted EPRA earnings per share (LTM)	0.01	(0.44)
EPRA NRV per share²	21.88	22.15

¹ EPRA earnings and adjusted EPRA earnings for 30 June 2022 are calculated for the last 12-month period ended on 30 June 2022.

² EPRA NRV and EPRA NRV per share were calculated based on the independent external valuations prepared in December 2021.

EPRA performance measures

a. EPRA net asset value

To guide investors on the market value of the Group's property portfolio and performance, the Group has been reporting various EPRA key performance indicators since 2018, alongside its operational metrics. Property valuations have historically been undertaken once a year by independent external valuers, using established and widely recognised methods including applying appropriate discount rates to property cash flow generation and applying capitalisation rates from precedent transactions.

In December 2021, 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). Based on those valuations the Directors had updated the Group's EPRA NRV, EPRA NTA and EPRA NDV for 30 June 2022 and 31 December 2021.The EPRA NRV as at 30 June 2022, set out in the table below amounts to £945.8 million, which equates to £21.88 per share. This NRV decline was a result of the reported loss for H1. The Group's annual revaluation will take place in December 2022.

	30 June 2022 £ million
	EPRA NRV (Net Reinstatement Value)	EPRA NTA⁴ (Net Tangible Assets)	EPRA NDV (Net Disposal Value)
NAV per the financial statements	269.9	269.9	269.9
Effect of exercise of options	6.1	6.1	6.1
Diluted NAV, after the exercise of options¹	276.0	276.0	276.0
Includes:
Revaluation of owned properties in operation (net of non-controlling interest)²	646.7	646.7	646.7
Revaluation of the JV interest held in two German properties (net of non-controlling interest) ²	3.6	3.6	3.6
Fair value of fixed interest rate debt	-	-	(29.1)
Deferred tax on revaluation of properties	-	-	(13.1)
Real estate transfer tax³	17.3	-	-
Excludes:
Fair value of financial instruments	7.1	7.1	-
Deferred tax	(9.3)	(9.3)	-
Intangibles as per the IFRS balance sheet	-	13.4	-
EPRA NAV	945.8	915.1	884.1
Fully diluted number of shares (in thousands)¹	43,220	43,220	43,220
EPRA NAV per share (in £)	21.88	21.17	20.46

¹ The fully diluted number of shares excludes treasury shares but includes 669,646 outstanding dilutive options (as at 31 December 2021: 585,867).

² The fair values of the properties were determined on the basis of independent external valuations prepared in December 2021. The properties under development are measured at cost.

³ EPRA NTA and EPRA NDV reflect fair value net of transfer costs. Transfer costs are added back when calculating EPRA NRV.

⁴ NTA is calculated under the assumption that the Group does not intend to sell any of its properties in the long run.

	31 December 2021 £ million
	EPRA NRV (Net Reinstatement Value)	EPRA NTA⁴ (Net Tangible Assets)	EPRA NDV (Net Disposal Value)
NAV per the financial statements	278.5	278.5	278.5
Effect of exercise of options	6.2	6.2	6.2
Diluted NAV, after the exercise of options¹	284.7	284.7	284.7
Includes:
Revaluation of owned properties in operation (net of non-controlling interest)²	636.1	636.1	636.1
Revaluation of the JV interest held in two German properties (net of non-controlling interest) ²	3.4	3.4	3.4
Fair value of fixed interest rate debt	-	-	(53.7)
Deferred tax on revaluation of properties	-	-	(13.0)
Real estate transfer tax³	17.2	-	-
Excludes:
Fair value of financial instruments	(0.4)	(0.4)	-
Deferred tax	(9.4)	(9.4)	-
Intangibles as per the IFRS balance sheet	-	14.3	-
EPRA NAV	951.2	919.7	857.5
Fully diluted number of shares (in thousands)¹	42,935	42,935	42,935
EPRA NAV per share (in £)	22.15	21.42	19.97

¹ The fully diluted number of shares excludes treasury shares but includes 585,867 outstanding dilutive options (as at 31 December 2020: 1,196,996).

² The fair values of the properties were determined on the basis of independent external valuations prepared in December 2021. The properties under development are measured at cost.

³ EPRA NTA and EPRA NDV reflect fair value net of transfer costs. Transfer costs are added back when calculating EPRA NRV.

⁴ NTA is calculated under the assumption that the Group does not intend to sell any of its properties in the long run.

EPRA earnings

The basis for calculating the Company's adjusted EPRA earnings of £0.6 million for the 12 months to 30 June 2022 (12 months to 31 December 2021: £(18.8) million) and the Company's adjusted EPRA earnings per share of 1.0 pence for the 12 months to 30 June 2022 (12 months to 31 December 2021: (44) pence) is set out in the table below:

	12 months ended 30 June 2022 £ million	12 months ended 31 December 2021 £ million
Earnings attributed to equity holders of the parent company	(29.6)	(52.1)
Depreciation and amortisation expenses	43.7	43.3
Revaluation of Park Plaza County Hall London Income Units	(0.6)	(0.6)
Changes in fair value of financial instruments	(3.0)	(1.7)
Non-controlling interests in respect of the above³	(7.1)	(6.4)
EPRA earnings	3.4	(17.5)
Weighted average number of shares (in thousands) (LTM)	42,542	42,539
EPRA earnings per share (in pence)	8	(41)
Company specific adjustments¹:
Capital loss on buy-back of Income Units in Park Plaza Westminster Bridge London	1.3	0.5
Remeasurement of lease liability⁴	3.6	3.6
Disposals and Other non-recurring expenses (including pre-opening expenses)⁸	1.2	(0.7)
Loan early repayment break costs¹¹	(0.1)	0.5
Business combination acquisition costs¹⁰	1.0	1.0
Settlement of legal claim⁶	3.1	3.1
Adjustment of lease payments⁵	(2.3)	(2.3)
One off tax adjustments⁷	(3.6)	(3.6)
Maintenance capex²	(9.1)	(5.7)
Non-controlling interests in respect of the above³	2.1	2.3
Company adjusted EPRA earnings¹	0.6	(18.8)
Company adjusted EPRA earnings per share (in pence)	1	(44)

Reconciliation Company adjusted EPRA earnings to normalised reported profit before tax
Company adjusted EPRA earnings	0.6	(18.8)
Reported depreciation⁹	(39.3)	(38.9)
Non-controlling interest in respect of reported depreciation³	7.0	6.3
Maintenance capex²	9.1	5.7
Non-controlling interest on maintenance capex and the company specific adjustments³	(2.1)	(2.3)
Adjustment of lease payments⁵	2.3	2.3
One off tax adjustments⁷	3.6	3.6
Reported loss attributable to non-controlling interest	1.4	(0.4)
Reported tax	(5.1)	(5.0)
Normalised loss before tax	(22.5)	(47.5)

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

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

³ Non-controlling interests include the non-controlling shareholders in Arena, third-party investors in income units of Park Plaza Westminster Bridge London and the non-controlling shareholders in the partnership with Clal that was entered into in June 2021.

⁴ Non-cash revaluation of finance lease liability relating to minimum future CPI/RPI increases.

⁵ Lease cash payments which are not recorded as an expense in the Group's income statement due to the implementation of IFRS 16.

⁶ Relates to a settlement reached in a legal dispute in Croatia (see Note 25a in the 2021 annual consolidated financial statements).

⁷ Mainly relates to deferred tax asset recorded in 2021 (see Note 27f in the 2021 annual consolidated financial statements).

⁸ In the LTM ended 30 June 2022 it mainly relates to pre-opening expense in Grand Hotel Brioni and art'otel Budapest. In the LTM ended 31 December 2022 in mainly relates to net profit on disposal of property, plant and equipment.

⁹ Reported depreciation excluding impairments.

¹⁰ Business combination acquisition costs (see Note 3a and 3b in the 2021 annual consolidated financial statements).

¹¹ Loan early repayment break costs (see note 15b in the 2021 annual consolidated financial statements).

REVIEW OF OPERATIONS

United Kingdom

Hotel operations

	Reported in £
	Six months ended 30 June 2022	Six months ended 30 June 2021
Total revenue	£71.1 million	£15.3 million
EBITDAR	£16.2 million	£(1.4) million
EBITDA	£16.1 million	£(1.7) million
Occupancy	56.5%	14.9%
Average room rate	£169.2	£113.7
RevPAR	£95.6	£16.9
Room revenue	£54.6 million	£9.7 million

The United Kingdom, our largest market, continued to see a strong recovery and benefited from all travel restrictions being lifted in the second half of January, earlier than in our other operating markets. Consequently, we saw a good level of new bookings and activity throughout the first six months of 2022. This pent-up demand was primarily from leisure guests booking weekend stays, however as the first half progressed, we saw growing demand from corporate guests, which supported weekday occupancy.

During the first half we took a selective approach to corporate demand, being mindful of the continued pressure on availability of housekeeping staff. Furthermore, bookings and enquiries for our meetings and events spaces grew encouragingly through the Period. The Group's rates-led strategy enabled its UK hotels to outperform the competitor set in RGI (RGI is the Revenue Generation Index which measures our RevPAR performance relative to an aggregated grouping of competitor hotels) ¹ .

Total revenue increased by 365.0% to £71.1 million (H1 2021: £15.3 million). The Group's disciplined focus on driving rates meant that average room rate increased by 48.8% to £169.2 (H1 2021: £113.7), which was 17.5% higher than the average room rate pre-pandemic (H1 2019: £144.0). Occupancy improved to 56.5% (H1 2021: 14.9%), which resulted in RevPAR of £95.6 (H1 2021: £16.9).

EBITDA increased by £17.8 million to £16.1 million (H1 2021: £(1.7) million). In the prior year, the Group benefited from government support in the form of grants and business rates relief.

The United Kingdom hotel market*

RevPAR was up 191.8% at £68.2 (H1 2021: £23.4), driven by a 59.0% increase in average room rate to £99.5 (H1 2021: £62.6) and an 83.5% increase in occupancy to 68.5% (H1 2021: 37.4%).

In London, RevPAR increased by 374.8% to £108.1 compared with £22.8 in H1 2021, reflecting a 130.0% increase in occupancy to 66.9% (H1 2021: 29.1%), and a 106.4% increase in average room rate to £161.5 (H1 2021: £78.2). Although the Group's reported growth in average room rate was 48.8%, it was against a stronger and more solid base with the Group's average room rate for H1 2021 at £113.7 versus the market at £78.2.

¹ STR Hotel Benchmarking, June 2022

*STR European Hotel Review, June 2022. Note: the market data in the H1 2021 Results Announcement, published by the Group on 1 September 2021, included STR data which was based on STR's methodology used during the pandemic. From this H1 2022 report onwards, the Group will revert back to presenting STR's usual benchmarking data methodology, which is reflected and updated for both 2022 and 2021 in the market data presented in this section.

The Netherlands

Hotel operations

	Reported in £			Reported in local currency €¹
		Six months ended 30 June 2022	Six months ended 30 June 2021	Six months ended 30 June 2022	Six months ended 30 June 2021
Total revenue		£14.7 million	£1.9 million	€17.5 million	€2.2 million
EBITDAR		£3.1 million	£(2.0) million	€3.6 million	€(2.3) million
EBITDA		£3.1 million	£(2.0) million	€3.6 million	€(2.3) million
Occupancy		40.9%	5.5%	40.9%	5.5%
Average room rate		£139.5	£91.5	€165.3	€105.7
RevPAR		£57.0	£5.0	€67.5	€5.8
Room revenue		£11.1 million	£1.0 million	€13.1 million	€1.1 million

¹ Average exchange rate from Euro to Pound Sterling for the period ended 30 June 20221 was 1.185 and for the period ended 30 June 2021 was 1.155, representing a 2.6% increase.

Hotel portfolio performance

Trading conditions improved from February onwards as COVID restrictions were eased across the Netherlands and demand returned. Park Plaza Amsterdam Airport, having been closed throughout the pandemic, reopened in April to accommodate refugees from the conflict in Ukraine. Subsequently, the hotel started welcoming other guests from June onwards. Demand in the region has been primarily from leisure guests. Demand for corporate travel, groups and meetings and events has continued to increase during the Period, however these segments are still behind 2019 demand levels and are yet to make a full recovery. The provincial hotels gained momentum faster than the Amsterdam city centre properties, resulting in competitor RGI outperformance¹ driven by the Group's rates-led strategy.

Total revenue (in local currency) increased to €17.5 million (H1 2021: €2.2 million), which represented a return to 58.9% of the pre-pandemic revenue levels reported in H1 2019. In line with the Group-wide rates-led strategy, average room rate increased by 56.4% to €165.3 (H1 2021: €105.7), an increase of 14.0% compared with pre-pandemic (H1 2019: €145.0). Occupancy improved to 40.9%, which, together with the significant improvement in average room rate, led to RevPAR of €67.5 (H1 2021: €5.8).

EBITDA improved by €5.9 million to €3.6 million (H1 2021: €(2.3) million).

The Dutch hotel market*

During H1 2022 RevPAR increased by 351.2% to €71.3 compared to €15.8 in H1 2021. Occupancy increased by 183.1% to 54.3% (H1 2021: 19.2%), and the average room rate was €131.3 (H1 2021: €82.4), 59.4% higher than in H1 2021.

In Amsterdam, our main market in the Netherlands, RevPAR increased by 649.2% to €84.1 (H1 2021: €11.2). Occupancy levels increased by 297.7% to 53.9% (H1 2021: 13.6%), and the average daily room rate increased by 88.4% to €155.9 (H1 2021: €82.8).

¹ STR Hotel Benchmarking, June 2022

Croatia

Operations

	Reported in £		Reported in local currency HRK¹
	Six months ended 30 June 2022	Six months ended 30 June 2021	Six months ended 30 June 2022	Six months ended 30 June 2021
Total revenue	£16.2 million	£5.3 million	HRK 145.1 million	HRK 46.6 million
EBITDAR	£(0.1) million	£(2.3) million	HRK (0.6) million	HRK (19.7) million
EBITDA	£(0.9) million	£(3.2) million	HRK (8.4) million	HRK (27.5) million
Occupancy²	43.6%	18.8%	43.6%	18.8%
Average room rate²	£84.5	£62.9	HRK 755.7	HRK 547.7
RevPAR²	£36.8	£11.8	HRK 329.3	HRK 102.9
Room revenue²	£8.7 million	£2.2 million	HRK 77.7 million	HRK 19.4 million

¹ Average exchange rate from Croatian Kuna to Pound Sterling for the period ended 30 June 2022 was 8.941 and for the period ended 30 June 2021 was 8.713, representing a 2.6% increase.
² The room revenue, average room rate, occupancy and RevPAR statistics include all accommodation units at hotels and self-catering apartment complexes and excludes campsite and mobile homes.

Portfolio performance

The seasonality of our operations in Croatia means that business activity intensified during the second quarter as all our hotels, apartment and campsites opened for the summer season. During the first quarter most of our properties were closed.

The revenue performance showed strong growth compared with last year and exceeded the same period pre-pandemic in 2019. This was supported by the market's accessibility by car during the Period, which was marked by significant international travel disruption across Europe. Total revenue (in local currency) increased significantly to HRK 145.1 million (H1 2021: HRK 46.6 million). This included a contribution from Grand Hotel Brioni, which has seen good demand since it was opened in May 2022 following an extensive repositioning programme, as well as benefitting from the Group's continued focus on rates.

This performance was driven by strong rate growth across our hotels, with average room rate up 38.0% to HRK 755.7. Occupancy improved from 18.8% in H1 2021 to 43.6% in H1 2022. As a result, RevPAR rose significantly to HRK 329.3 (H1 2021: HRK 102.9), an increase of 9.5% compared with pre-pandemic levels in 2019 (H1 2019: HRK 300.8).

Despite the strong revenue performance, EBITDA was impacted by cost inflation for utilities, food and payroll. Overall, the EBITDA loss was reduced to HRK (8.4) million (H1 2021: HRK (27.5) million). Included within the overall EBITDA loss are HRK 6.8 million of expenses related to the opening of Grand Hotel Brioni in May 2022. Excluding these non-recuring expenses, the like-for-like EBITDA loss was HRK 1.6 million.

Germany

Hotel operations

	Reported in £		Reported in local currency €¹
	Six months ended 30 June 2022	Six months ended 30 June 2021	Six months ended 30 June 2022	Six months ended 30 June 2021
Total revenue	£6.4 million	£0.9 million	€7.6 million	€1.1 million
EBITDAR	£2.7 million	£(1.4) million	€3.2 million	€(1.6) million
EBITDA	£2.7 million	£(1.4) million	€3.2 million	€(1.6) million
Occupancy	42.0%	9.1%	42.0%	9.1%
Average room rate	£98.9	£64.4	€117.2	€74.3
RevPAR	£41.5	£5.9	€49.2	€6.8
Room revenue	£5.4 million	£0.8 million	€6.4 million	€0.9 million

¹ Average exchange rate from Euro to Pound Sterling for the period ended 30 June 2022 was 1.185 and for the period ended 30 June 2021 was 1.155, representing a 2.6% increase.

Hotel portfolio performance

Following the lifting of COVID-19 restrictions in March 2022, we saw an accelerating trend towards recovery during Q2. This included a return of demand for our city centre hotels predominantly from leisure guests, which resulted in a significant improvement in performance vs H1 2021.

The Group outperformed its competitor set in average rate, in line with its rates-focused strategy¹.

Total revenue (in local currency) was €7.6 million, compared with €1.1 million for the same period last year. In line with our strategy to drive rates, average room rate increased by 57.7% to €117.2 (H1 2021: €74.3) and was 6.3% above the average room rate in H1 2019 (H1 2019: 110.2). Occupancy improved to 42.0% (H1 2021: 9.1%). As a result, RevPAR increased to €49.2, up from €6.8.

EBITDA improved to €3.2 million, compared with a loss of €1.6 million in the prior year and €3.7 million profit in 2019. The German government continued to provide support with payroll and operating expenses during the Period, which amounted to €2.6 million.

The German hotel market*

The German market experienced a 264.6% increase in RevPAR to €49.4 (H1 2021: €13.5), resulting from a 180.7% improvement in occupancy to 50.1% (H1 2021: 17.9%) and a 29.9% increase in average room rate to €98.5 (H1 2021: €75.8).

In Berlin, RevPAR increased by 399.1% to €58.6 (H1 2021: €11.7) and occupancy increased by 234.8% to 57.6% (H1 2021: 17.2%). Average room rate increased 49.1% to €101.8 (H1 2021: €68.3).

¹ STR Hotel Benchmarking, June 2022

Other Markets: Austria, Hungary, Italy and Serbia

Hotel operations

	Reported in £
	Six months ended 30 June 2022	Six months ended 30 June 2021
Total revenue	£3.2 million	£0.0 million
EBITDAR	£0.2 million	£(0.4) million
EBITDA	£0.2 million	£(0.4) million
Occupancy	27.8%	1.1%
Average room rate	£103.9	£51.1
RevPAR	£28.9	£0.6
Room revenue	£2.3 million	£0.0 million

Hotel portfolio performance

The properties in this operating region, with the exception of art'otel Budapest, have been recently acquired by the Group.

Our property in Austria, the FRANZ Ferdinand Mountain Resort Nassfield performed well during the winter ski season, its first season under the Group's ownership. The resort closed in March for soft renovations, before reopening in early June in time for the summer season in the Alps. Post the summer season, we plan to invest in air-conditioning throughout the property and create relaxation and wellness areas, including an indoor and outdoor swimming pool, which will support the planned year-round operating potential for this property.

In Hungary, we reopened art'otel Budapest in June following the closure of the hotel throughout the pandemic, during which time we started refurbishing of the public areas, including the lobby, restaurant, bar, meeting spaces and wellness area. Works are expected to be completed during august and a bedroom renovation programme is planned to commence thereafter.

In Serbia, the 88 Rooms Hotel in Belgrade delivered a solid performance. We continued to progress plans to refurbish and relaunch this hotel in due course.

In Italy, our 101-room hotel in the centre of Rome closed at the end of the Period and repositioning work commenced. This will transform the hotel into an upper upscale lifestyle art'otel and is expected to reopen in H2 2023.

Total revenue was £3.2 million and EBITDA was £0.2 million.

Management and Central Services

		Reported in £
	Six months ended 30 June 2022		Six months ended 30 June 2021
Total revenue before elimination	£13.3 million		£6.1 million
Revenues within the consolidated Group	£(11.8) million		£(3.9) million
External and reported revenue	£1.5 million		£2.2 million
EBITDA	£(4.0) million		£(5.3) million

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. For the six months ended 30 June 2022 the segment showed an EBITDA loss of £4.0 million, as both internally and externally charged management fee did not exceed the costs in this segment (H1 2021: loss of £5.3 million which was positively affected by government payroll support that was not taken in 2022).

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.

PRINCIPAL RISKS AND UNCERTAINTIES

Through our risk management process, we maintain a clear view of our most prominent threats and look ahead at the emerging risk trends which could have a notable impact on our business. The strength of our risk management programme means leadership decisions are aligned with our risk appetite and are made in full awareness of the threats we face.

The integration of risk management and routine assessments within each corporate function allows us greater information at the leadership level and ensures each function remains alert to risks and is accountable for reporting on them on a regular basis, whether or not their profile has changed.

While our risk priorities remain broadly the same as those reported within the 2021 Annual Report, our assessment of risk is dynamic and updated at the executive level frequently.

The improved market conditions and recovery in occupancy levels, with significant leisure demand and steadily increasing corporate demand has reduced our overall assessment of unfavourable market dynamics (Medium/Decreased), although we will monitor the impact of the current cost of living pressures closely.

Our improved performance has also seen a reduction in our funding and liquidity risk (High/Decreased) as the threat of breaching debt covenants eases.

The risk of operational disruption has also eased with the lifting of pandemic restrictions (Medium/Decreased).

We consider the adverse macro-economic conditions and industry-wide cost pressures to be our most significant risk area (Very High/Increased) and we are focussed on acting to mitigate the challenges they present to our performance. In particular, we are acting to protect our margins in the face of the steep rise in energy and supply costs. This includes hedging strategies and investment in initiatives to reduce energy consumption across our operations.

The uncertain macro-economic environment has also led to increased risk assessments in respect of development project delivery (High/Increased) due to increased supply risk and cost inflation, and business critical supply chain failures (High/Increased).

These risks and uncertainties are expected to remain relevant to the Company for the next six months of its financial year. These risks are monitored closely and proactive measures are taken to mitigate the threats .

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors confirm that, to the best of their knowledge, these interim condensed consolidated financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation as a whole for the period ended 30 June 2022. The interim management report includes a fair review of the information required by DTR 4.2.7 R and DTR 4.2.8 R, namely:

· An indication of important events which have occurred during the first six months and their impact on the condensed set of financial statements, plus a description of the principal risks and uncertainties for the remaining six months of the financial year

· Material related-party transactions in the first six months and any material changes in the related party transactions described in the last annual report for the year ended 31 December 2021

· The directors of the Company are listed in the last annual report for the year ended 31 December 2021. A current list of directors is maintained on the website of the Company ( www.pphe.com )

GOING CONCERN

As at 30 June 2022 the Group continued to hold a strong liquidity position with an overall consolidated cash balance of £126 million and access to £77.2 million of undrawn facilities. Detailed budgets and cash flow projections for 2022 and 2023, which show that the Group's hotel operations will be cash generative during the Period, have been considered by the Directors in adopting the going concern basis for preparing these financial statements. Having reviewed those cash flow projections, the Directors have determined that the Company is likely to continue in business for at least 12 months from the date of this announcement. This, taken together with their conclusions on the matters referred to herein and in Note 1 to the consolidated financial statements, has led the Directors to conclude that it is appropriate to prepare the half-year consolidated financial statements on a going concern basis.

INDEPENDENT REVIEW REPORT TO PPHE HOTEL GROUP LIMITED

To: The Board of Directors of PPHE Hotel Group Limited

Introduction

We have reviewed the accompanying interim condensed consolidated financial statements of PPHE Hotel Group Limited and its subsidiaries (the Group) as at 30 June 2022 which comprise the interim consolidated statement of financial position as at 30 June 2022 and the related interim consolidated income statement, and consolidated statements of comprehensive income, changes in equity and cash flows for the six-month period then ended.

Management is responsible for the preparation and presentation of this interim financial information in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with IAS 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global

Tel Aviv, Israel

31 August 2022

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	30 June 2022 Unaudited £'000	31 December 2021 Audited £'000
ASSETS
NON-CURRENT ASSETS:
Intangible assets	13,439	14,290
Property, plant and equipment	1,286,141	1,236,000
Right-of-use assets	217,930	215,921
Investment in joint ventures	5,320	4,315
Other non-current financial assets	27,381	16,386
Restricted deposits and cash	9,040	8,121
Deferred income tax assets	10,956	10,221
	1,570,207	1,505,254

CURRENT ASSETS:
Restricted deposits	5,315	5,204
Inventories	2,828	1,840
Trade receivables	22,618	6,811
Other receivables and prepayments	12,885	19,457
Cash and cash equivalents	126,007	136,802
	169,653	170,114
Total assets	1,739,860	1,675,368

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

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	30 June 2022 Unaudited £'000	31 December 2021 Audited £'000
EQUITY AND LIABILITIES
EQUITY:
Issued capital	-	-
Share premium	132,253	131,229
Treasury shares	(3,494)	(3,482)
Foreign currency translation reserve	11,586	3,806
Hedging reserve	4,304	(434)
Accumulated earnings	125,240	147,350

Attributable to equity holders of the parent	269,889	278,469
Non-controlling interests	171,154	168,742
Total equity	441,043	447,211
NON-CURRENT LIABILITIES:
Bank borrowings	767,799	729,284
Provision for concession fee on land	5,175	5,057
Financial liability in respect of Income Units sold to private investors	122,863	124,551
Other financial liabilities	259,732	253,362
Deferred income taxes	7,500	7,236
	1,163,069	1,119,490
CURRENT LIABILITIES:
Trade payables	23,952	16,650
Other payables and accruals	74,957	53,177
Bank borrowings	36,839	38,840
	135,748	108,667
Total liabilities	1,298,817	1,228,157
Total equity and liabilities	1,739,860	1,675,368

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

INTERIM CONSOLIDATED INCOME STATEMENT

		Six months ended
	30 June 2022 Unaudited £'000		30 June 2021 Unaudited £'000
Revenues	113,191		25,758
Operating expenses	(95,040)		(38,577)

EBITDAR	18,151		(12,819)
Rental expenses	(1,129)		(1,185)

EBITDA	17,022		(14,004)
Depreciation and amortisation	(19,488)		(19,054)

EBIT	(2,466)		(33,058)
Financial expenses	(18,724)		(16,574)
Financial income	539		921
Other income	2,670		1,033
Other expenses	(4,922)		(2,448)
Net income (expense) for financial liability in respect of Income Units sold to private investors	(3,103)		279
Share in results of associate and joint ventures	(95)		(486)

Loss before tax	(26,101)		(50,333)
Income tax benefit	144		59
Loss for the period	(25,957)		(50,274)

Loss attributable to: Equity holders of the parent	(22,110)		(44,677)
Non-controlling interests	(3,847)		(5,597)
	(25,957)		(50,274)

Basic and diluted earnings per share (in Pound Sterling)	(0.52)		(1.05)

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

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Six months ended
	30 June 2022 Unaudited £'000		30 June 2021 Unaudited £'000
Loss for the period	(25,957)		(50,274)

Other comprehensive income (loss) to be recycled through profit and loss in subsequent periods:
Profit from cash flow hedges¹	8,735		280
Foreign currency translation adjustments of foreign operations²	10,005		(14,106)

Other comprehensive income (loss), net	18,740		(13,826)

Total comprehensive loss	(7,217)		(64,100)

Total comprehensive loss attributable to: Equity holders of the parent	(9,592)		(55,085)
Non-controlling interest	2,375		(9,015)
	(7,217)		(64,100)

1 Included in hedging reserve.

2 Included in foreign currency translation reserve.

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

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Issued capital¹ £'000	Share premium £'000	Treasury shares £'000	Foreign currency translation reserve £'000	Hedging reserve £'000	Accumulated earnings £'000	Attributable to equity holders of the parent £'000	Non- controlling interests £'000	Total equity £'000
Balance as at 1 January 2022 (audited)	-	131,229	(3,482)	3,806	(434)	147,350	278,469	168,742	447,211
Loss for the period	-	-	-	-	-	(22,110)	(22,110)	(3,847)	(25,957)
Other comprehensive income (loss) for the period	-	-	-	7,780	4,738	-	12,518	6,222	18,740
Total comprehensive income (loss)	-	-	-	7,780	4,738	(22,110)	(9,592)	2,375	(7,217)
Share based payments	-	1,024	-	-	-	-	1,024	37	1,061
Share buy back (note 3e)	-	-	(12)	-	-	-	(12)	-	(12)
Balance as at 30 June 2022 (unaudited)	-	132,253	(3,494)	11,586	4,304	125,240	269,889	171,154	441,043
Balance as at 1 January 2021 (audited)	-	131,389	(3,482)	20,804	(703)	161,587	309,595	95,358	404,953
Loss for the period	-	-	-	-	-	(44,677)	(44,677)	(5,597)	(50,274)
Other comprehensive income (loss) for the period	-	-	-	(10,556)	148	-	(10,408)	(3,418)	(13,826)
Total comprehensive income (loss)	-	-	-	(10,556)	148	(44,677)	(55,085)	(9,015)	(64,100)
Share based payments	-	481	-	-	-	-	481	44	525
Exercise of options	-	(1,342)	-	-	-	-	(1,342)	-	(1,342)
Transactions with non-controlling interests	-	-	-	-	-	37,809	37,809	79,520	117,329
Balance as at 30 June 2021 (unaudited)	-	130,528	(3,482)	10,248	(555)	154,719	291,458	165,907	457,365

1 No par value.

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

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

	Six months ended
	30 June 2022 Unaudited £'000	30 June 2021 Unaudited £'000
Cash flows from operating activities:
Loss for the period	(25,957)	(50,274)
Adjustments to reconcile loss to cash used in operating activities:
Financial expenses including expenses for financial liability in respect of Income Units sold to private investors	21,827	16,574
Financial income	(539)	(1,200)
Income tax benefit	(144)	(59)
Loss (gain) on disposal of assets	45	(1,033)
Loss on buy-back of Income Units sold to private investors	733	-
Share based payments	1,061	525
Revaluation of lease liability	1,841	1,773
Share in results of associate and joint ventures	95	486
Share appreciation rights revaluation	1,350	-
Fair value movement derivatives through profit and loss	(2,670)	-
Depreciation and amortisation	19,488	19,054
	43,087	36,120
Changes in operating assets and liabilities:
Decrease (increase) in inventories	(940)	118
Increase in trade and other receivables	(9,105)	(9,648)
Increase in trade and other payables	25,881	17,940
	15,836	8,410
Cash paid and received during the period for:
Interest paid	(18,653)	(15,247)
Interest received	420	300
Taxes paid	(168)	(193)
	(18,401)	(15,140)
Net cash flows provided by (used in) operating activities	14,565	(20,884)

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

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

	Six months ended
	30 June 2022 Unaudited £'000	30 June 2021 Unaudited £'000
Cash flows from investing activities:
Investments in property, plant and equipment	(46,885)	(27,965)
Proceeds from disposal of property, plant and equipment	-	1,373
Investment in intangible assets	(77)	(131)
Loan to Joint Venture	(844)	(403)
Increase in restricted cash, net	(776)	(21)
Net cash flows used in investing activities	(48,582)	(27,147)
Cash flows from financing activities:
Net proceeds (payments) from transactions with non-controlling interests	-	125,823
Proceeds from long-term loans	39,019	11,177
Repayment of long-term loans	(12,093)	(21,660)
Repayment of leases	(2,538)	(815)
Buy-back of Income Units previously sold to private investors	(2,231)	-
Net cash flows provided by financing activities	22,157	114,525
Increase (decrease) in cash and cash equivalents	(11,860)	66,494
Net foreign exchange differences	1,065	(2,742)
Cash and cash equivalents at beginning of period	136,802	114,171
Cash and cash equivalents at end of period	126,007	177,923

Non-cash items:
Lease additions and lease remeasurement	4,978	2,273
Outstanding payables on investments in property, plant and equipment	4,606	4,006

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

NOTES:

Note 1: General

a. PPHE Hotel Group, together with its subsidiaries (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.

b. These financial statements have been prepared in a condensed format as of 30 June 2022 and for the six months then ended ('interim consolidated financial statements'). These financial statements should be read in conjunction with the Company's annual consolidated financial statements as of 31 December 2021 and for the year then ended and the accompanying notes ('annual consolidated financial statements').

c. The Company 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.

d. Going concern and liquidity

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, which take into account the current trading environment and the industry-wide cost pressures, have been prepared for 2022 and 2023 and show that the Group's hotel operations are expected to be cash generative during the Period. Having reviewed those cash flow projections, the Directors have determined that the Company is likely to continue in business for at least 12 months from the date of approval of the consolidated financial statements.

Note 2: Basis of preparation and changes in accounting policies

The interim consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements, except for the adoption of new standards effective as of 1 January 2022. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The adoption of the following new standards effective as of 1 January 2022 had no material impact on the interim consolidated financial statements:

· Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37

· Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16

· IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities

Note 3: Significant events during the reported period

a. Financing for development of art'otel in Zagreb, Croatia

On 30 March 2022, Arena Hospitality Group d.d. ("Arena") through its wholly owned subsidiary Ulika d.o.o., had entered into a new loan agreement with Erste & Steiermärkische bank d.d. for the purpose of financing the development of its premium lifestyle art'otel in Zagreb, Croatia.

The facility is in a total amount of €12.6 million (£10.8 million), maturing in 2034 at a fixed interest rate of 2.2%.

b. Financing of Londra & Cargill Hotel in Rome, Italy

On 22 February 2022, Londra Cargill Parent S.r.l, a wholly owned subsidiary of the Company, entered into a €25 million (£21 million) facility with UniCredit S.p.A. (the 'Facility'). The Facility consists of two tranches: Tranche A in the amount of €17.25 million is available for immediate drawdown upon signing the facility agreement and Tranche B in the amount of €7.75 million will be available for drawdown upon completion of the hotel refurbishment and meeting certain conditions. The term of the facility is four years and it will bear an interest rate of 6 month Euribor, which was fixed by an interest rate swap at a rate of 0.6065%, plus a margin of 3.2%.

Given that there is an economic relationship between the hedged item and the hedging instrument as the terms of the interest rate swap match the terms of the loan (i.e., notional amount, maturity and payment), the Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the interest rate swap is identical to the hedged risk component. As at 30 June 2022 the interest rate swap had a fair value of £0.5 million and is included in other non-current assets. The change in the fair value of the interest rate swap in the amount of £0.5 million for the six months ended 30 June 2022 is recorded as Other Comprehensive Income.

c. Interest rate swap for the financing of art'otel London Hoxton

On 17 February 2022, PPHE Hoxton BV entered into a forward interest rate swap agreement with Bank Hapoalim B.M. (the "BHI") in order to hedge the variable interest exposure of the £180 million facility with BHI to fund the development of art'otel London Hoxton (the "Facility"). The interest rate swap has a notional amount of £180 million, amortising 2% per year starting September 2024 in line with the Facility, whereby on a quarterly basis starting 20 June 2024 PPHE Hoxton BV will receive a variable rate equal to 3 month Sonia and will pay a fixed rate of interest of 1.4765% on the outstanding notional amount. The interest rate swap will mature on 8 April 2030 in line with the final maturity date of the Facility (including a six-year extension).

Given that there is an economic relationship between the hedged item and the hedging instrument as the terms of the interest rate swap match the terms of the loan (i.e., notional amount, maturity and payment), the Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the interest rate swap is identical to the hedged risk component. As at 30 June 2022 the interest rate swap has a fair value of £7.2 million and is included in other non-current assets. The change in the fair value of the interest rate swap in the amount of £7.2 million for the six months ended 30 June 2022 is recorded as Other Comprehensive Income.

d. Corporate interest rate swap

Given the recent interest rate movements, on 25 April 2022, Park Plaza hotels (uk) ltd, a wholly owned subsidiary of the Company, entered into two forward interest rate swap agreements with Santander UK Plc in order to partially hedge the interest rate exposure of the outstanding €165.6 million and £208.6 million loans that are expected to be refinanced in June 2026. The first interest rate swap has a notional amount of £100 million whereby on a quarterly basis starting 30 June 2026 until 30 June 2031 Park Plaza hotels (uk) ltd will receive a variable rate equal to 3 month Sonia and will pay a fixed rate of interest of 1.941% on the notional amount. The second interest rate swap has a notional amount of €100 million whereby on a quarterly basis starting 30 June 2026 until 30 June 2031 Park Plaza hotels (uk) ltd will receive a variable rate equal to 3 month Euribor and will pay a fixed rate of interest of 1.95% on the notional amount. The interest rate swap agreements includes a mandatory early termination at 30 June 2026.

Although the Group has entered into these interest rate swaps to serve as an economic hedge against changes in future interest payments, the interest rate swaps do not qualify as accounting hedges under IFRS 9 due to the mandatory early termination. Accordingly, these interest rate swaps are accounted for as financial instruments measured at fair value through profit or loss. As at 30 June 2022 the interest rate swaps have a fair value of £2.7 million and are included in other non-current assets. The change in the fair value of the interest rate swaps in the amount of £2.7 million for the six months ended 30 June 2022 is recorded as other income in the consolidated income statement.

The interest rate swaps in notes b., c., and d. above are valued using valuation techniques for swap models, using present value calculations. The models incorporate various inputs, including the credit quality of counterparties, and interest rate curves. The fair value measurement is Level 2 of the fair value hierarchy.

e. Share buyback programme

On 28 June 2022, the Company's board of directors approved the commencement of a share buyback programme to buy up to a maximum of 300,000 Ordinary Shares for an aggregate consideration (excluding expenses) of up to a maximum of £1.7 million. As at 30 June 2022 the Company completed a purchase of 847 shares in a total amount of £12 thousand.

Note 4: Segment data

For management purposes, the Group's activities are divided into Owned Hotel Operations and Management Activities. Owned Hotel Operations are further divided into four reportable segments: the Netherlands, Germany, Croatia and the United Kingdom. Other includes individual hotels in Hungary, Serbia, Italy and Austria. 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.

		Six months ended 30 June 2022 (unaudited)
	The Netherlands £'000	Germany £'000	United Kingdom £'000	Croatia £'000	Other¹ £'000	Management and holding companies £'000	Adjustments² £'000	Consolidated £'000
REVENUE
Third party	14,743	6,374	71,098	16,230	3,234	1,512		113,191
Inter-segment			102	72		11,776	(11,950)
Total revenue	14,743	6,374	71,200	16,302	3,234	13,288	(11,950)	113,191
Segment EBITDA	3,050	2,700	16,061	(944)	192	(4,037)		17,022
Depreciation and amortisation								(19,488)
Financial expenses								(18,724)
Financial income								539
Net income for financial liability in respect of Income Units sold to private investors								(3,103)
Other income (expenses), net								(2,252)
Share in results of associate and joint ventures								(95)
Loss before tax								(26,101)

^1. Includes art'otel Budapest in Hungary, 88 Rooms Hotel in Belgrade, Serbia, Londra & Cargill Hotel in Rome, Italy, FRANZ Ferdinand Mountain Resort in Nassfeld, Austria.

^2. Consist of inter-company eliminations.

		Six months ended 30 June 2021 (unaudited)
	The Netherlands £'000	Germany £'000	United Kingdom £'000	Croatia £'000	Other¹ £'000	Management and holding companies £'000	Adjustments² £'000	Consolidated £'000
REVENUE
Third party	1,902	928	15,290	5,324	56	2,258	-	25,758
Inter-segment	-		14	19		3,888	(3,921)
Total revenue	1,902	928	15,304	5,343	56	6,146	(3,921)	25,758
Segment EBITDA	(2,008)	(1,390)	(1,742)	(3,158)	(393)	(5,313)	-	(14,004)
Depreciation and amortisation								(19,054)
Financial expenses								(16,574)
Financial income								921
Net expenses for financial liability in respect of Income Units sold to private investors								279
Other income (expenses), net								( 1,415)
Share in results of associate and joint ventures								(486)
Loss before tax								(50,333)

^1. Includes art'otel Budapest in Hungary and 88 Rooms Hotel in Belgrade, Serbia.

^2. Consist of inter-company eliminations.

Note 5: Financial instruments

Fair value of financial instruments:

During the period ended 30 June 2022, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Note 6: Other disclosures

a. Seasonality

The Group is in an industry with seasonal variations. Sales and profits vary by quarter and the second half of the year is generally the stronger trading period.

b. Other income

	Six months ended 30 June 2022 (Unaudited) £'000	Six months ended 30 June 2021 (Unaudited) £'000
Revaluation of interest rate swap (note 3d)	2,670	-
Gain from sale of property, plant and equipment	-	1,033
Total	2,670	1,033

c. Other expenses

	Six months ended 30 June 2022 (Unaudited) £'000	Six months ended 30 June 2021 (Unaudited) £'000
Loan early repayment break costs	-	(572)
Other non-recurring expenses (including pre-opening expenses)	(953)	(103)
Loss on disposal of property, plant and equipment	(45)	-
Revaluation of finance lease¹	(1,841)	(1,773)
Capital loss on buy-back of income units previously sold to private investors	(733)	-
Revaluation of share appreciation rights	(1,350)	-
Total	(4,922)	(2,448)

1. Non-cash revaluation of finance lease liability relating to minimum future CPI/RPI increases.

d. Earnings per share

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

Potentially dilutive instruments are not considered since their effect is antidilutive (increase of loss per share).

Six months ended 30 June 2022
(Unaudited)

Six months ended 30 June

2021
(Unaudited)

Reported loss attributable to Equity holders of the parent (£'000)

(22,110)

(44,677)

Weighted average number of ordinary shares outstanding (in thousands)

42,545

42,539

e. Related parties

Balances with related parties

	30 June 2022 £'000 (Unaudited)	31 December 2021 £'000 (Audited)
Loans to joint ventures	6,270	5,222
Short-term receivables	47	56
Payable to GC Project Management Limited	(116)	(50)
Payable to Gear Construction UK Limited	(1,861)	(1,082)

Transactions with related parties

	Six months ended 30 June 2022 (Unaudited) £'000	Six months ended 30 June 2021 (Unaudited) £'000
Cost of transactions with GC Project Management Limited	60	30
Cost of transaction with Gear Construction UK Limited	27,057	11,475
Rent income from sub lease of office space	39	-
Interest income from jointly controlled entities	59	49

Londra & Cargill project management agreement

On 26 August 2022, the Group entered into an agreement with GC Project Management Limited for the provision of project management services to the Group in respect of the redevelopment of Hotel Londra & Cargill in Rome, Italy for a fixed total fee of £640,000 to be paid in monthly instalments for the duration of the project. The contractual framework is the same as for all such prior project management agreements entered into with GC Project Management Limited.

f. Subsequent events

The Board has approved the payment of an interim dividend of 3 pence per ordinary share, for the period ended 30 June 2022, to all shareholders who are on the register at 16 September 2022. The

interim dividend is to be paid on 14 October 2022.

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PPHE Hotel Group Ltd (PPH)

Tuesday, 14th May 2024

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