Information  X 
Enter a valid email address

Action Hotels PLC (AHCG)

  Print      Mail a friend

Friday 28 September, 2018

Action Hotels PLC

Interim financial statements

RNS Number : 2514C
Action Hotels PLC
28 September 2018
 

Action Hotels plc

Interim financial statements for the six months ended 30 June 2018

Action Hotels plc, the leading owner, developer and asset manager of branded three and four-star hotels in the Middle East and Australia, is pleased to announce its unaudited results for the six months ended 30 June 2018.

 

Key Highlights and Financial Overview

 

Year-on-year growth in key financial performance indicators - Revenue (up 16%) and Gross profit (up 12%)

 

Total reported revenue increased to $32.7m (30 June 2017: $28.1m), driven by new hotel rooms

 

Gross profit increased by $2.4m to $21.9m (30 June 2017: $19.5m)

 

Adjusted EBITDA1 decreased by 64% to $2.4m (30 June 2017: $6.8m), mainly due to the downward fair value adjustment of $3.8m of the investment land.

 

Net loss before tax of $13.0m (30 June 2017: Net loss of $5.3m), as expected and primarily driven by the impact of increased financing costs to develop the pipeline and the impact of depreciation on newly opened hotels

 

LTV of 61% (2017: 58%)

 

Property asset values have decreased by $11m to $564m since 31 Dec 2017, resulting in a net asset value (NAV) of $184m at 30 June 2018 (31 December 2017: $202m)

 

Adjusted NAV (adding back deferred tax liability and assets) is $206m compared to $224m as at year end.

 

Adjusted NAV per share was USD 1.40/GBP 1.06 (2017: USD 1.52/GBP 1.12)

 

 

Operational Highlights

 

2,623 operating rooms at the end of June, a 20% increase from H1 2017 (30 June 2017: 2,181) with the openings of ibis Styles, Bahrain (August 2017) and Novotel Melbourne South Wharf (March 2018)

 

Strong occupancy levels from our mature hotels2, being maintained on a like-for-like basis at 73.7% (30 June 2017: 72.7%)

 

Average EBITDA breakeven occupancy levels across the portfolio remain low at c. 37% (30 June 2017: 37%)

 

Continued strong operational and financial performances from the two hotels in Kuwait, ibis Salmiya and ibis Sharq, with both hotels operating over 80% occupancy

 

Ibis Budget Melbourne Airport also continues to perform strongly with around 90% occupancy (30 June 2017: 90%)

 

Current Trading and Portfolio update

The Board confirms that, current trading remains on track with management expectations, despite certain markets in the Middle East facing headwinds impacting the performance of businesses throughout the region. Growth comes from the newly opened rooms and the occupancy of the Groups seven mature hotels2 at 73.7% underpins Action's resilient business model in the economy and midmarket hotel sector, with low break-even levels and the recently opened hotels delivering growth. However, mindful of the current economic and political climate in the Middle East there is pressure on room rates and as at the reporting of the interim results the Board took the decision to further delay the opening of the Mercure Riyadh Hotel which is now expected to open during late 2019 in a prime location of Riyadh in Saudi Arabia.

The interim results include a downward fair value adjustment of investment land of $3.8m. This follows the commencement of an exercise to explore the sale of the aforementioned land with a view to providing working capital to the Group. This sale exercise, has to date, elicited offers which are below the fair value of the land as held on the Group's balance sheet reported as at 31 December 2017. Accordingly, the Board has deemed it appropriate to apply a downward fair value adjustment of this land to reflect this proposal. There can be no guarantee that this land will be sold, or that such a value could be achieved in such a sale.

Additionally, Action Hotels has received an unsolicited approach by way of a non-binding letter of intent for the sale of a hotel in Australia. The Board is considering this offer, which is above the current book value of the hotel, on its merits and in the context of the cash requirements of the Group and other fundraising opportunities available to it. There can be no certainty that any deal will proceed, or that such a value could be achieved in such a sale.

 

RECOMMENDED CASH OFFER for ACTION HOTELS PLC by ACTION REAL ESTATE CO KSCC

At the recent Court Meeting held on 24th September, a majority in number of Scheme Shareholders, who voted (either in to person or by proxy) and who together represented over 3/4ths of the voting rights of Scheme Shareholders who are on the Company's register of members at the Voting Record Time, voted in favour of the resolution to approve the Scheme. The resolution was accordingly passed.

At the recent General Meeting held on 24th September, the requisite majority of Action Hotels Shareholders voted (either in to person or by proxy) to pass the Special Resolutions in connection with i) amending the Articles to give authority to the directors to take all such actions as may be necessary to implement the  Scheme; and ii) the de-listing of the Action Hotels Shares from the AIM Market.

Full details of the resolutions passed are set out in the notices of the Court Meeting and General Meeting contained in the scheme document dated 31 August 2018 that was sent to Action Hotels Shareholders (the "Scheme Document"), a copy of which is available on Action Hotel's website at www.actionhotels.com

 

 

Commenting on the results, Andrew Lindley, Action Hotels Interim CEO and CFO said:

 

"We are pleased to update the market on the first half year results, with solid operational performances being delivered across our hotel portfolio.  Even though the markets remain challenging across the Middle East, our strategy of continued investment into our hotel pipeline delivers growth from new rooms."

 

Commenting on the results, Sheikh Mubarak A.M. Al Sabah, Founder and Chairman of Action Hotels said:

"I am pleased to announce a solid performance for Action Hotels for the first six months of 2018. We continue to be committed to our strategy of meeting the increasing demand for quality, value for money internationally branded hotel accommodation across the Middle East and Australia."

 

 

For more information, contact:

Action  Hotels plc

Andrew Lindley, Chief Financial Officer

Katie Shelton, Director of Corporate Affairs

 

+44 (0)77 9977 0588

WH Ireland Limited (Financial Adviser to Action Hotels)

Adrian Hadden

Jessica Cave

 

+44 (0)20 7220 1666

 

 

 

     

Notes to Editors

Action Hotels PLC

Action Hotels PLC is a leading owner, developer and asset manager of branded three- and four-star hotels in the Middle East and Australia. Established in 2005, Action Hotels currently has 14 completed hotels with 2,623 rooms in aggregate across the Middle East and Australia, with further properties in development in the Middle East.

More information is available at http://www.actionhotels.com/

Notes

1.   Adjusted EBITDA is defined as operating profit before depreciation, amortisation, restructuring and listing costs, gains and losses arising from the disposal of property, plant and equipment and pre-opening costs.

2.   On a like-for-like basis - a comparison of the mature trading hotels; ibis Glen Waverly, ibis Budget Melbourne Airport, ibis Sharq, ibis Salmiya, ibis Amman, Holiday Inn Muscat and ibis Muscat, excluding any currency movements.

3.   Adjusted NAV is the net asset value of the Group adjusted for the deferred tax provision required on the revaluation of properties to the Statement of Financial Position.

 

All currency amounts are in US $ unless otherwise stated.

 

Cautionary Statement

This announcement contains unaudited information and forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts and undue reliance should not be placed on any such statements because they speak only as at the date of this document and are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Action Hotel's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.  Action Hotels undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations. 

 

Operating performance

 

Six months ended 30 June 2018

Six months ended 30 June 2017

% change

Revenue

$32.7m

$28.1m

+16%

Total Occupancy

  65.3%

  64.0%

+1.3%

Occupancy2

  73.7%

  72.7%

+1.0%

 

Total Portfolio

Consolidated revenues were 16% higher over the period, with contribution from new rooms and Middle East and Australian hotels continuing to contribute strong average occupancies. Total occupancy is lower than the mature (like for like) occupancy by 8.4% (30 June 2017: 8.7%) due to the weighting of lower occupancies in the newly opened hotels as they grow to maturity in their respective markets.

 

Total operating rooms reached 2,623 as at 30 June 2018, a 20% increase on the same period last year.

 

Despite pressure across the Middle Eastern markets, the Group's seven mature hotels2 continue to deliver strong occupancy levels at a combined 73.7%, (30 June 2017: 72.7%) 100bp above previous year illustrating the resilient business model.

 

Middle East

In the Middle East, hotels showed an increase in occupancy of 4.4% but a decrease in ADR of 7.5% (on a like for like basis, excludes hotels opened in the last 12 months) resulting in a RevPAR reduction of 1.0%. Kuwait, however, remained strong with an average occupancy of over 80% across the two hotels. Management is working closely with its hotel operators to ensure that hotels continue to grow their market share and maintain a low-cost base resulting in low breakeven levels.

 

Australia

The Australian hotels performed well, performing above last year and delivering an increase of 48% in revenue, driven predominantly from the opening of our largest hotel, Novotel Melbourne South Wharf, in March 2018 and continues to show encouraging trading with occupancy over 50% after only 3½ months trading. Ibis Budget Melbourne Airport recorded the highest occupancy in the portfolio with year to date occupancy of just below 90%.

 

Hotel pipeline

Action Hotels now has 14 operating hotels with 2,623 rooms.  The Group's pipeline currently consists of a further two hotels, Novotel Dubai Creek and Mercure Riyadh Olaya, and a total of 2,969 rooms upon completion of the pipeline hotel developments.

 

Financial Performance

 

Six months ended 30 June 2018

Six months ended 30 June 2017

% change

Total revenue

$32.7m

$28.1m

+16%

Gross Profit

Adjusted EBITDA 1

$21.9m 

 $2.4m

$19.5m 

 $6.8m

+12%

-64%

Adjusted EBITDA 1 margin

     7%

     24%

-17%

Reported (loss) before tax

   $(13,018)

   $(5,307k)

 

 

Adjusted EBITDA amounted to $2.4m, a 64% decrease over the same period last year with adjusted EBITDA margin reducing to 7%, mainly due to the downward fair value adjustment of the investment land of $3.8m.

 

The operating performance is stable with the growth coming predominantly from the new rooms in Australia and Bahrain. The steady central overheads of the Head Office helped to support EBITDA margin at 20% excluding the $3.8m impairment.

 

Gross Finance costs have increased by $1.7m over the same period versus last year as the company has, as planned, utilised debt facilities to fund the pipeline of hotels, some of the funds are also directed to the operation increasing interest payments reported in the financial statements. With the opening of two hotels in 2017 the Depreciation and Amortisation charge has also increased by $0.9m as expected over last year with the full year effect coming through as the hotels mature. Also, the company has increased pre-opening costs compared to the same period last year by $0.4m, with the opening of the 347 room Novotel South Wharf, Melbourne March 2018, compared to no hotel openings in H1 2017 and the 95 room ibis Styles Bahrain in August 2017.

 

Net Asset Value

 

Net asset value reduced by $18m to $184m at 30 June 2018 (2017: $202m), mainly due to the operating loss including the downward fair value adjustment on the investment land. NAV will be reviewed at year end as perform fair value assessments of our portfolio at the end of the reporting period by certified valuers.

 

 

Six months ended 30 June 2018

Year ended 31 December 2017

% change

Net asset value

$184m

$202m

-9%

Adjusted NAV 3

$206m

$224m

-8%

Adjusted NAV 3 per share

$1.40

$1.52

-8%

 

Interim Dividend         

The Board maintain their position to not pay a dividend.

 

 

Review report on the condensed interim consolidated financial information to the shareholders of Action Hotels plc

 

Introduction

We have reviewed the accompanying condensed interim consolidated statement of financial position of Action Hotels plc and its subsidiaries (together "the Group") as at 30 June 2018 and the related condensed interim consolidated income statement and statements of comprehensive income, changes in equity and cash flows for the six-month period then ended and other explanatory notes. Management is responsible for the preparation and presentation of this condensed interim consolidated financial information in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted for use in the European Union. Our responsibility is to express a conclusion on this condensed interim consolidated 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 condensed interim consolidated financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted for use in the European Union.

 

Material uncertainty relating to going concern

We draw attention to Note 2 to the condensed interim consolidated financial information, which indicates that the Group incurred a net loss of US$ 13 million during the six-month period ended 30 June 2018 and, as of that date, the Group's current liabilities exceeded its current assets by US$ 188 million.  As stated in Note 2, these conditions indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

 

 

PricewaterhouseCoopers

28 September 2018

 

 

Virendra Lodhia

Dubai, United Arab Emirates

 

Note:

The maintenance and integrity of Action Hotels plc's website is the responsibility of the directors; the work carried out by the independent auditors does not involve consideration of these matters and, accordingly, the independent auditors accept no responsibility for any changes that may have occurred to the condensed interim consolidated financial information and half-yearly report since they were initially presented on the website.

 

Condensed interim consolidated income statement

 

 

Six month ended 30 June

 

2018

 

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Revenue

32,672

 

28,079

Cost of sales 

(10,782)

 

(8,619)

Gross profit

21,890

 

19,460

General and administrative expenses

(26,414)

 

(18,014)

Operating (loss) / profit

(4,524)

 

1,446

 

 

 

 

Adjusted EBITDA

2,402

 

6,751

Depreciation and amortization

(6,234)

 

(5,230)

Pre-opening expenses

(505)

 

(95)

Other expenses - net

(187)

 

20

Operating (loss) / profit

(4,524)

 

1,446

 

 

 

 

Finance income

123

 

117

Finance costs

(8,617)

 

(6,870)

Finance costs - net

(8,494)

 

(6,753)

 

 

 

 

Loss before tax

(13,018)

 

(5,307)

Income tax

-

 

(273)

Deferred tax

-

 

2,296

Loss for the period

(13,018)

 

(3,284)

 

 

 

 

Loss is attributable to:

 

 

 

Owners of Action Hotels plc

(12,850)

 

(3,118)

Non-controlling interests

(168)

 

(166)

Total

(13,018)

 

(3,284)

 

 

 

 

Loss per share attributable to equity holders of the Company:

 

 

 

Basic

(8.7)c

 

(2.1)c

Diluted

(8.7)c

 

(2.1)c

 

All operations were continuing throughout the periods. The accompanying notes on pages 7 to 28 are an integral part of this condensed interim consolidated financial information.

 

 

Condensed interim consolidated statement of comprehensive income

 

 

 

Six month ended 30 June

 

 

2018

 

2017

 

 

USD'000

 

USD'000

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

Loss for the period

 

(13,018)

 

(3,284)

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

Items that may be reclassified to profit or loss:

 

 

 

 

Exchange differences on translation of foreign operations

 

(4,987)

 

3,208

Other comprehensive (loss) / income for the period net of tax

 

(4,987)

 

3,208

Total comprehensive loss for the period

 

(18,005)

 

(76)

 

 

 

 

 

Total comprehensive loss for the period is attributable to:

 

 

 

 

Owners of Action Hotels plc

 

(17,837)

 

90

Non-controlling interests

 

(168)

 

(166)

 

 

(18,005)

 

(76)

 

 

 

 

 

 

Total comprehensive income attributable to equity shareholders arises from continuing operations. The accompanying notes on pages 7 to 28 are an integral part of this condensed interim consolidated financial information.

 

Condensed interim consolidated statement of financial position

 

 

 

30 June

 

31 December

 

 

2018

 

2017

 

Note

USD'000

 

USD'000

 

 

(Unaudited)

 

(Audited)

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property and equipment

8

531,848

 

538,545

Investment property

7

10,890

 

14,725

Intangible assets

 

15,431

 

15,950

Deferred tax assets

 

3,084

 

3,084

Cash and bank balances

 

3,195

 

3,201

 

 

564,448

 

575,505

Current assets

 

 

 

 

Inventories

 

324

 

267

Trade and other receivables

 

14,192

 

14,160

Due from related parties

9

10,608

 

10,459

Cash and bank balances

 

7,827

 

8,199

 

 

32,951

 

33,085

Total assets

 

597,399

 

608,590

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

27,089

 

30,580

Due to related parties

 

5,819

 

6,470

Borrowings

10

182,556

 

183,779

Loan due to related parties

9

5,000

 

-

Finance lease liabilities

 

533

 

518

 

 

220,997

 

221,347

 

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

10

128,138

 

127,799

Loan due to related parties

9

25,549

 

19,765

Trade and other payables

 

3,517

 

2,076

Deferred tax liabilities

 

25,711

 

25,711

Provision for employees end of service benefits

 

1,160

 

1,123

Derivative financial liabilities

 

501

 

501

Finance lease liabilities

 

7,998

 

8,435

 

 

192,574

 

185,410

Total liabilities

 

413,571

 

406,757

Net assets

 

183,828

 

201,833

 

 

 

 

 

Equity

 

 

 

 

Share capital

11

24,102

 

24,102

Share premium

11

24,479

 

24,479

Revaluation reserve

 

99,341

 

99,341

Merger and other reserves

12

(8,926)

 

(3,939)

Retained earnings

 

26,567

 

39,417

Net equity attributable to owners of Action Hotels plc

 

165,563

 

183,400

Non-controlling Interests

 

18,265

 

18,433

Total equity

 

183,828

 

201,833

 

The accompanying notes on pages 7 to 28 are an integral part of these condensed interim consolidated financial information. The condensed interim consolidated financial information was approved by the Board of Directors and authorised for issue on 28 September 2018. They were signed on its behalf by:

 

 

.............................................                                .............................................

Rawaf I. Bourisli                                                           Andrew Lindley 

Dirctor                                                                           Chief Executive Officer                                                         

 

Condensed interim consolidated statement of changes in equity

 

Attributable to owners of Action Hotels plc

 

 

 

 

 

Share

 

Share

 

Revaluation

 

Merger and other

 

Retained

 

 

 

 

Non-

Controlling

 

Total

 

capital

 

premium

 

reserve

 

reserves

 

earnings

 

Total

 

Interests

 

equity

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017 (Audited)

24,102

 

24,479

 

84,123

 

(9,417)

 

55,861

 

179,148

 

15,640

 

194,788

Loss for the period

-

 

-

 

-

 

-

 

(3,118)

 

(3,118)

 

(166)

 

(3,284)

Other comprehensive income for the period

-

 

-

 

-

 

3,208

 

-

 

 

3,208

 

 

-

 

3,208

Total comprehensive income / (loss) for the period

-

 

-

 

-

 

3,208

 

(3,118)

 

 

90

 

 

(166)

 

(76)

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

-

 

-

 

-

 

-

 

(2,864)

 

(2,864)

 

-

 

(2,864)

Share based payments

-

 

-

 

-

 

4

 

-

 

4

 

-

 

4

At 30 June 2017 (Unaudited)

24,102

 

24,479

 

84,123

 

(6,205)

 

49,879

 

176,378

 

15,474

 

191,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2018 (Audited)

24,102

 

24,479

 

99,341

 

(3,939)

 

39,417

 

183,400

 

18,433

 

201,833

Loss for the period

-

 

-

 

-

 

-

 

(12,850)

 

(12,850)

 

 

(168)

 

(13,018)

Other comprehensive loss for the period

-

 

-

 

-

 

(4,987)

 

-

 

(4,987)

 

 

-

 

(4,987)

Total comprehensive income for the period

24,102

 

24,479

 

99,341

 

(4,987)

 

(12,850)

 

(17,837)

 

 

(168)

 

(18,005)

At 30 June 2018 (Unaudited)

24,102

 

24,479

 

99,341

 

(8,926)

 

26,567

 

165,563

 

18,265

 

183,828

 

The accompanying notes on pages 7 to 28 are an integral part of this condensed interim consolidated financial information.

 

Condensed interim consolidated statement of cash flows

 

Six months ended 30 June

 

2018

 

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Unaudited)

Cash flows from operating activities:

 

 

 

Loss before tax

(13,018)

 

(5,307)

Adjustments for:

 

 

 

Finance costs

8,617

 

6,751

Finance income

(123)

 

(117)

Depreciation of property and equipment

5,822

 

4,907

Amortisation of intangible assets

412

 

323

Loss on disposal of property and equipment

282

 

-

Provision for end of service benefits

426

 

373

Loss on fair valuation of investment property

3,835

 

-

Share based payments

-

 

4

Operating cash flows before payment of employees' end of service benefits and changes in working capital:

6,253

 

6,934

Payment of employees end of service benefits

(383)

 

(375)

Increase in trade and other receivables

(172)

 

(7,260)

(Increase)/decrease in receivables due from related parties

(2,857)

 

3,656

Increase in inventories

(60)

 

(20)

(Decrease)/increase in trade and other payables

(2,257)

 

1,883

Increase in due to related parties

2,094

 

1,496

Cash generated from operation

2,618

 

6,314

Tax paid

-

 

-

Net cash generated from operating activities

2,618

 

6,314

 

 

 

 

Cash flow from investing activities

 

 

 

Interest received

123

 

117

Capital expenditure from restricted cash

565

 

842

Transfers to restricted cash

(830)

 

(821)

Purchase of intangible assets

(158)

 

(63)

Purchase of property and equipment

(11,868)

 

(27,986)

Net cash used in investing activities

(12,168)

 

(27,911)

 

 

 

 

Cash flow from financing activities

 

 

 

Repayment of borrowings

(17,972)

 

(41,182)

Drawdown of borrowings

24,099

 

60,891

Drawdown of loan from related parties

11,212

 

11,254

Finance costs paid

(8,226)

 

(6,979)

Dividend paid

-

 

(2,864)

Net cash generated from financing activities

9,113

 

21,120

 

 

 

 

Net decrease in cash and cash equivalents

(437)

 

(477)

Cash and bank balances at the beginning of the period

7,227

 

3,595

Effect of foreign exchange changes

(169)

 

188

Unrestricted cash and cash equivalents at end of the period

6,621

 

3,306

Restricted cash and cash equivalents

1,206

 

751

Total cash and cash equivalents at the end of the period

7,827

 

4,057

 

 

 

 

Cash and cash equivalents

7,827

 

4,057

Deposits having original maturity of more than three months

3,195

 

181

Cash and bank balances

11,022

 

4,238

 

The notes on pages 7 to 28 are an integral part of this condensed interim consolidated financial information

 

 

 

1       General information

 

Action Hotels plc ("the Company") is incorporated in Jersey under the Companies (Jersey) Law 1991 with the registered number 112945. The address of the registered office is 5th Floor, 37 Esplanade, St Helier Jersey, JE1 2TR.

The Company is a public limited company and has its primary listing on the AIM division of the London Stock Exchange. The principal activities of the Company and its subsidiaries ("the Group") are owning, developing, operating and managing hotel assets in the Middle East and Australia. The Group's principal administrative subsidiary, Action Hotels Limited, is domiciled in Dubai International Financial Centre, which is its principal place of business.

Action Hotels plc was incorporated in Jersey on 7 May 2013 and took control of the Action Hotels business on 9 December 2013 through a common control transaction with its shareholder. The Company issued 100 million shares to its shareholder in return for 100% of the beneficial interest in and voting control over the issued share capital of Action Hotels Limited. Action Hotels Limited in turn acquired 100% of the issued share capital of Action Hotels Company LLC, a company incorporated in Kuwait, through a share for share exchange.

Action Hotels plc was subsequently admitted to trading on the AIM division of the London Stock Exchange and issued a further 47,637,195 shares on 23 December 2013.

Pursuant to the transaction, Action Hotels Company LLC, which had previously been the parent company of the Group became a subsidiary of Action Hotels plc and the existing shareholder of Action Hotels Company LLC became the shareholder in Action Hotels plc.

The half year results and condensed interim consolidated financial information for the six months ended 30 June 2018 (the "condensed interim consolidated financial information") comprise the results of the Group.

This condensed interim consolidated financial information has been reviewed, not audited.

 

2        Basis of preparation

 

The condensed interim consolidated financial information has been prepared in accordance with IAS 34 'Interim financial reporting' as adopted by the European Union. The condensed interim consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and IFRS Interpretation Committee interpretations as adopted by the European Union and the Companies (Jersey) law 1991.

The condensed interim consolidated financial information have been prepared on the going concern basis. The Directors have made this assessment for a period of at least twelve months from the date of the approval of these condensed interim consolidated financial information after consideration of the Group's expenditure commitments, current financial projections and expected future cash flows, together with the available cash resources and undrawn committed borrowing facilities.

The accounting policies adopted are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2017, except for the adoption of new and amended standards as set out in the following pages.

 

Going Concern

 

The Group incurred a net loss of USD 13,018,000 for the period ended 30 June 2018 (30 June 2017: USD 3,284,000) and as of 30 June 2018, the Group's current liabilities exceeded its current assets by USD 188,046,000 (31 December 2017: USD 188,262,000). Total assets continue to exceed total liabilities by USD 183,828,000 (31 December 2017: USD 201,833,000).

Notwithstanding this, the condensed interim consolidated financial information has been prepared on the going concern basis. The Directors have made this assessment for a period of at least twelve months from the date of the approval of this condensed interim consolidated financial information after consideration of the Group's expenditure commitments, current financial projections and expected future cash flows, together with the available cash resources and undrawn committed borrowing facilities. The Group prepares detailed forward cash flow projections for future periods. There are a number of assumptions and estimates involved in calculating these future projections, including Management's expectations of increase in gross sales from maturing hotels and hotels still due to open from the pipeline; growth in EBITDA; timing and quantum of future capital expenditure; the estimation of future funding and the cost of such funding.

Management is also in the process of refinancing existing and negotiating further new funding facilities. The principal shareholder and a shareholder has also confirmed their intention to provide continued financial support to the Group so as to enable the Group both to meet its liabilities as and when they fall due and to carry on its business without significant curtailment of operations for a period of at least twelve months from the date of the approval of this condensed interim consolidated financial information.

 

(a)     New standards, amendments and interpretations adopted by the Group from 1 January   2018.

 

A number of new or amended standards became applicable from 1 January 2018 which the Group has adopted:

·          IFRS 9, 'Financial Instruments' (effective from 1 January 2018); and

·          IFRS 15, 'Revenue from Contracts with Customers' (effective from 1 January 2018).

 

Upon adoption of these standards, the Group has assessed the impact on the Group's condensed interim consolidated financial information line items and noted no material differences which would require any disclosure / adjustment. 

There are no other IFRSs or IFRSIC interpretations that are effective and would be expected to have a material impact on the Group. 

 

 

b)      New standards and amendments not early adopted by the Group

 

Certain new standards and amendments to existing standards have been published and are mandatory for the Group's accounting periods beginning after 1 January 2019 or later periods, but have not been early adopted by the Group:

 

·          IFRS 16, 'Leases' (effective from 1 January 2019)

 

The new standard eliminates the classification of leases as either operating leases or finance leases for a lessee. Instead all leases are treated in a similar way to finance leases applying IAS 17. Leases are 'capitalised' by recognising the present value of the lease payments and showing them either as lease assets (right-of-use assets) or together with property, plant and equipment. The Group is in the process of assessing the potential impact of the application of IFRS 16 on the amounts reported and disclosures made in this condensed interim consolidated financial information.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group's condensed interim consolidated financial information.

 

New accounting policies applied from 1 January 2018

IFRS 9, 'Financial Instruments' - Accounting Policies

Classification

From 1 January 2018, the Group classifies its financial assets in the following measurement categories:

·     Those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss); and 

·    Those to be measured at amortised cost.

 

The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows. Management determines the classification of its investment at initial recognition .

Recognition and measurement 

Regular purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

 

Financial assets at fair value through other comprehensive income (FVOCI) are carried at fair value. After initial measurement, the Group present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group's right to receive payments is established.

The Group classifies debt instruments at amortized cost using effective interest rate method.

IFRS 9 replaces the 'incurred loss' model with a forward-looking 'expected credit loss' (ECL) model. The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision.

IFRS 15, 'Revenue from Contracts with Customers' - Accounting Policies

The Group recognises revenue from contracts with customers based on a five step model as set out in IFRS 15.

1)   Identify the contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria for every contract that must be met.

2)   Identify the performance obligations in the contract: A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer.

3)   Determine the transaction price: The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

4)   Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one performance obligation, the Group will allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Group expects to be entitled in exchange for satisfying each performance obligation.

5)   Recognise revenue when (or as) the entity satisfies a performance obligation at a point time or over time.

 

The Group satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:

·    The customer simultaneously receives and consumes the benefits provided by the Group's performance as the Group performs; or

·    The Group's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

·    The Group's performance does not create an asset with an alternate use to the Group and the Group has an enforceable right to payment for performance obligations completed to date.

 

For performance obligations where none of the above conditions are met, revenue is recognised at the point in time at which the performance obligation is satisfied.

Revenue is recognised in the condensed interim consolidated income statement to the extent that it is probable that the economic benefits will flow to the Group and the revenue and costs, if and when applicable, can be measured reliably.

(i)         Owned and leased hotels

Revenue is primarily derived from hotel operations, including the rental of rooms, food and beverage sales and other services from owned and leased hotels operated under the Group's brand names. Revenue is recognised when rooms are occupied, food and beverages are sold and services are performed.

Revenue is recognised net of returns, rebates, municipality fees and discounts. Service charges collected from the customers are recorded as revenue, as the Group is the principal/ primary obligor and is required to provide the service to the customer in return for the receipt of the service charge.

(ii)        Customer loyalty programmes

 

The Group's hotels participate in the Le Club Accor hotels and IHG Rewards customer loyalty programmes to provide customers with incentives to buy room nights. These customer loyalty programmes are owned and operated by Accor/IHG respectively and, therefore, the entity retains no obligations in respect of the award credits other than to pay the programme operator for the granted award credits.

 

The Group concluded that it is acting as principal in this transaction and, in substance, is earning revenue from supplying these awards to its customer. The Group measures these revenues at fair value and recognises these gross from the costs of participating in the programme.

(iii)       Other revenue and expenses

Other revenue and expenses are recognised on the accrual basis.

 

3        Financial risk management

 

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

The condensed interim consolidated financial information do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2017. There have been no changes in the risk management department or in any risk management policies since the year end.

 

4      Critical judgements and accounting estimates

The preparation of condensed interim consolidated financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 

In preparing this condensed interim consolidated financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Group's annual consolidated financial statements for the year ended 31 December 2017.

 

5      Segment information

The Board of Directors of the Group is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance of the Group.

The Group is organised within two geographical regions, Middle East and Australia excluding central functions. These geographical regions along with hotels under construction and undeveloped land sites comprise the Group's four reportable segments. No operating segments have been aggregated to form these reportable segments.

Central management costs represent the head office and management costs incurred at the Group level, which have not been subsequently allocated to any operating segment. Each of the geographical segments derives its revenue from the ownership and management of hotel operations.

The Board of Directors use a measure of adjusted EBITDA to assess performance.

 

(a)        Segmental revenue and results

 

The following is an analysis of the Group's revenue and results by reportable segments:

 

 

Six months ended 30 June 2018 (Unaudited)

 

 

 

 

 

 

Middle East

 

Australia

 

Consolidated

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

Revenue

20,504

 

12,168

 

32,672

Adjusted EBITDA - hotel operations

7,861

 

4,357

 

12,218

Central management and other costs

 

 

 

 

(16,742)

Operating profit

 

 

 

 

(4,524)

Finance income

 

 

 

 

123

Finance costs

 

 

 

 

(8,617)

Loss before tax

 

 

 

 

(13,018)

 

Six months ended 30 June 2017 (Unaudited)

 

 

 

 

 

 

Middle East

 

Australia

 

Consolidated

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

Revenue

19,881

 

8,198

 

28,079

Adjusted EBITDA - hotel operations

7,896

 

3,313

 

11,209

Central management and other costs

 

 

 

 

(9,763)

Operating profit

 

 

 

 

1,446

Finance income

 

 

 

 

117

Finance costs

 

 

 

 

(6,870)

Loss before tax

 

 

 

 

(5,307)

The revenue of each segment for each period arises wholly from external sales.

Adjusted EBITDA for hotel operations represent the profit earned by each segment without allocation of central administration costs including Directors' salaries, pre-opening costs, investment revenue and finance costs, and tax.        

 

(b)           Segmental assets

 

30 June

2018

 

31 December

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

Middle East hotel operations

277,542

 

280,814

Australia hotel operations

231,602

 

123,037

Hotels under construction

62,566

 

176,037

Undeveloped land sites

10,890

 

14,725

Not allocated

14,799

 

13,977

 

597,399

 

608,590

For the purposes of monitoring segment performance and allocating resources between segments, the Group's management monitor the tangible, intangible and financial assets attributable to each segment. Assets classed as not allocated represent the current assets attributable to the central management function of the business and mainly relate to head office cash balances and certain balances with related parties.

Other segmental information

 

 

30 June

2018

 

31 December

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

Additions and contributions to property and equipment

 

 

 

Middle East hotel operations

1,074

 

2,024

Australia hotel operations

1,958

 

213

Hotels under construction

9,544

 

79,307

 

12,576

 

81,544

 

       

 

(c)        Geographical information - Revenue

 

The country of domicile for the Group's head office is United Arab Emirates (UAE); the table below shows the revenue from external customers split between those attributed to the country of domicile and all other foreign countries.

 

 

30 June

2018

 

30 June

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Unaudited)

 

 

 

 

UAE

2,076

 

2,246

Kuwait

6,918

 

6,828

Oman

7,265

 

7,242

Bahrain

2,932

 

2,363

Jordan

1,312

 

1,202

Australia

12,169

 

8,198

 

32,672

 

28,079

 

        

 

(d)        Geographical information - Non-current assets

The country of domicile for the Group's head office is United Arab Emirates (UAE); the table below shows the non-current asset split between those attributed to the country of domicile and all foreign countries.

 

 

30 June

2018

 

31 December

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

UAE

93,416

 

88,589

KSA

16,698

 

16,542

Kuwait

48,605

 

49,482

Oman

105,674

 

107,080

Bahrain

54,651

 

55,168

Jordan

15,502

 

15,545

Australia

229,902

 

243,099

 

564,448

 

575,505

6      Loss per share

(a)        Basic loss per share

 

Basic loss per share is calculated by dividing the profit/(loss) attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

 

Loss per share attributable to equity holders of the Company:

30 June

2018

 

30 June

2017

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Loss for the period (USD'000)

(12,850)

 

(3,118)

Weighted average number of shares

147,637,195

 

147,637,195

Basic loss per share (USD)

(0.087)

 

(0.021)

 

(b)        Diluted loss per share

 

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

 

 

30 June

2018

 

30 June

2017

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Loss for the period (USD'000)

(12,850)

 

(3,118)

Weighted average number of shares

147,637,195

 

147,637,195

Diluted loss per share (USD)

(0.087)

 

(0.021)

 

 

The 5,179,116 options (30 June 2017: 5,179,116 options) are not included in the calculation of diluted earnings per share because they are antidilutive for the period ended 30 June 2018 and 2017. These options could potentially dilute basic earnings per share in future.

 

The 3,690,930 warrants (30 June 2017: 3,690,930 warrants) are not included in the calculation of diluted earnings per share because they are antidilutive for the period ended 30 June 2018 and 2017. These options could potentially dilute basic earnings per share in future.

 

7        Investment property
 

 

30 June

 2018

 

31 December

 2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

At 1 January

14,725

 

14,725

Net loss from fair valuation

(3,835)

 

-

 

10,890

 

14,725

 

At 30 June 2018 and 31 December 2017, investment property represent the Group's interest in land held for undetermined use situated in the UAE. Investment properties are carried at fair value. The valuation method adopted to determine the fair value is based on inputs not based on observable data (that is, unobservable inputs - level 3). The net loss from fair valuation is a result of the internal assessment undertaken by the management for TECOM land.

 

 

8          Property and equipment

 

 

Operational Hotels

 

 

 

 

 

 

 

 

 

Land

 

Buildings

 

Fixture, Fittings & Equipment

 

Hotels under construction

 

Other FF&E

 

Vehicles

 

Total

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

Cost or fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2018 (Audited)

117,870

 

248,350

 

47,781

 

160,321

 

5,059

 

417

 

579,798

Additions

-

 

449

 

2,043

 

9,544

 

425

 

115

 

12,576

Transfers

-

 

116,291

 

3,175

 

(119,466)

 

-

 

-

 

-

Disposals

-

 

(709)

 

-

 

(282)

 

-

 

-

 

(991)

Exchange differences

(2,099)

 

(8,483)

 

(1,039)

 

(1,524)

 

(24)

 

(1)

 

(13,170)

At 30 June 2018 (Unaudited)

115,771

 

355,898

 

51,960

 

48,593

 

5,460

 

531

 

578,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation:

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2018 (Audited)

-

 

18,168

 

20,227

 

-

 

2,563

 

295

 

41,253

Charge for the period

-

 

3,258

 

2,248

 

-

 

262

 

54

 

5,822

Exchange differences

-

 

(319)

 

(379)

 

-

 

(11)

 

(1)

 

(710)

At 30 June 2018 (Unaudited)

-

 

21,107

 

22,096

 

-

 

2,814

 

348

 

46,365

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value:

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2018 (Unaudited)

115,771

 

334,791

 

29,864

 

48,593

 

2,646

 

183

 

531,848

At 1 January 2018 (Audited)

117,870

 

230,182

 

27,554

 

160,321

 

2,496

 

122

 

538,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leased assets

Buildings includes the following amounts where the Group is a lessee under a finance lease (note 15):

 

Leasehold building

30 June

2018

 

31 December

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

Cost

9,330

 

9,330

Accumulated depreciation

(1,164)

 

(931)

Net book amount

8,166

 

8,399

 

Hotels in operation and under construction are carried at fair value. The valuation method adopted to determine the fair value is based on inputs not based on observable data (that is, unobservable inputs - level 3).

 

At 30 June 2018, had the land and buildings of the Group been carried at historical cost less accumulated depreciation and impairment losses, their carrying amount would have been USD 387,942,000 (31 December 2017: USD 397,005,000). The revaluation surplus is disclosed in the condensed interim consolidated statement of changes in equity. The revaluation surplus cannot be distributed due to legal restrictions.

 

Total assets under construction as at 30 June 2018 include a hotel in Dubai Healthcare City, amounting to USD 40,059,000 (31 December 2017: USD 31,770,000) and hotels in the Kingdom of Saudi Arabia amounting to USD 8,532,000 (31 December 2017: USD 8,143,000).

 

Land, buildings and fixtures and fittings of operational hotels and hotels under construction with a carrying amount of USD 486,009,000 (31 December 2017: USD 374,401,000) have been pledged to secure borrowings of the Group. The Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.

 

 

 

9        Related party balances and transactions

 

The Group has entered into various transactions with related parties in the normal course of its business concerning financing and other related services. Prices and terms of payment are approved by the Group's management. All significant related party transactions and balances are listed below and are principally with entities under control of the Group's principal shareholder, Action Group Holding Co. KSCC:

 

 

30 June

2018

 

31 December 2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

Due from related parties

10,608

 

10,459

Due to related parties

(5,819)

 

(6,470)

 

4,789

 

3,989

 

Due from related parties

 

Name of related parties

 

Relationship

 

30 June

 2018

 

31 December 2017

 

 

 

 

USD'000

 

USD'000

 

 

 

 

(Unaudited)

 

(Audited)

 

 

 

 

 

 

 

Action Real Estate Co. Dubai

 

Shareholder

 

8,815

 

8,740

Action Real Estate Co. KSA

 

Others

 

971

 

971

Action Realty Australia Pty Ltd

 

Others

 

537

 

542

Action Business Center Ltd

 

Others

 

285

 

206

 

 

 

 

10,608

 

10,459

 

 

 

 

 

 

 

 

Interest is charged on amounts due from related parties in Australia at a rate of 6% (2017: 6%). The total interest charge is of USD 23,000 (30 June 2017: USD 24,000).

 

 

Interest is charged on the advance paid to Action Real Estate Co. Dubai amounting to USD 3,714,000 (31 December 2017: USD 3,714,000) at a rate of 5% (30 June 2017: 5%). The total interest income charged during the period amounted to USD 93,000 (30 June 2017: 93,000).

 

During the period, the Group received rent from related parties for leasing of premises amounting to USD 106,000 (30 June 2017: USD 86,000).

 

Due to related parties

 

Name of related parties

Relationship

30 June

 2018

 

31 December 2017

 

 

USD'000

 

USD'000

 

 

(Unaudited)

 

(Audited)

 

 

 

 

 

Action Real Estate Co. K.S.C.C. (AREC)

Others

3,463

 

4,650

Action Group Holding Company K.S.C.C

Shareholder

1,425

 

1,224

Action Group Holding Company (Oman)

Others

42

 

49

Others

Others

889

 

547

 

 

5,819

 

6,470

 

Expenditure incurred on services provided by related parties:

 

Name of related parties

Relationship

30 June

2018

 

30 June

2017

 

 

USD'000

 

USD'000

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

Action Real Estate Co. K.S.C.C.

Others

2,246

 

2,187

Dr. Suad M. S. Al Sabah

Others

317

 

172

Action Group Holding Company K.S.C.C

Shareholder

588

 

156

 

 

3,151

 

2,515

 

 

 

 

 

 

Expenditure incurred by related parties on behalf of the Group and subsequently recharged:

 

Name of related parties

Relationship

30 June

2018

 

30 June

2017

 

 

USD'000

 

USD'000

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

Action Real Estate Co. K.S.C.C.

Others

96

 

991

Action Group Holding Company (Oman)

Others

1

 

-

Action Group Australia

Others

-

 

8

 

 

97

 

999

 

 

 

 

 

Expenditure incurred by the Group on behalf of the related parties and subsequently recharged:

 

Name of related parties

Relationship

30 June

2018

 

30 June

2017

 

 

USD'000

 

USD'000

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

Action Real Estate Co. K.S.C.C.

Others

22

 

66

Action Group Holding Company K.S.C.C

Shareholder

9

 

1

Action Group Holding Company (Oman)

Others

-

 

2

 

 

31

 

69

 

 

 

 

 

 

Related party guarantees

Further, one of the shareholders of the Group and the ultimate owner of the Group have provided performance guarantees on behalf of the Group for certain borrowings. These guarantees, issued in the normal course of business, are outstanding at the end of the period and no outflow of resources embodying economic benefits in relation to these guarantees is expected by the Group.

This guarantee fees paid is included above as part of expenditure incurred on services provided by related parties.

 

 

Relationship

30 June 2018

 

30 June 2017

 

 

USD'000

 

USD'000

 

 

 

 

 

Action Group Holding Company K.S.C.C

Others

211

 

77

Dr. Suad M. S. Al Sabah

Others

317

 

172

Others

Shareholder

26

 

-

 

 

554

 

249

During 2016, the Group entered into a conditional agreement with Sheikh Mubarak Al Sabah to purchase his interest in Action Hotels FZ-LLC. An amount of USD 3,714,000 was paid as refundable advance against this agreement. Further in December 2016, Sheikh Mubarak Al Sabah transferred his interest in Action Hotels FZ-LLC together with the advance to Action Real Estate Co. Dubai. The amount of advance paid has been included within due from related parties above.

Loans due to related parties

 

Relationship

30 June

2018

 

31 December

2017

 

 

USD'000

 

USD'000

 

 

(Unaudited)

 

(Audited)

 

 

 

 

 

Action Real Estate Company Kuwait

Others

13,373

 

15,855

Water Front Place Development Trust

Others

1,893

 

1,989

Action Group Kuwait

Others

283

 

1,921

EBLA Computer Consultancy Co. KSC

Others

15,000

 

-

 

 

30,549

 

19,765

 

 

During the period, the Group obtained an additional loan amounting to USD 15,000,000 (31 December 2017: Nil) from EBLA Computer Consultancy Co. KSC for investment in the Group's development pipeline and general working capital purposes repayable in 3 annual instalments of USD 5,000,000 from the date of draw down. This loan carries an interest rate of 9% per annum

 

In June 2018, the other related party loans were extended by mutual agreement and are now repayable within 13 months from the date of the condensed interim consolidated financial information. The loans carry an interest rate of 9.9% (31 December 2017: 9.9%) per annum. As at 30 June 2018, there is no material variance between the carrying value of the loans and their fair value.

During the period, the Group paid an interest on these loans amounting to USD 979,000 (30 June 2017: USD 428,000).

At 30 June 2018, the Group had total undrawn borrowing facilities from a related party amounting to USD 9,458,000 (31 December 2017: USD 9,036,000).

Remuneration of Key Management Personnel:

 

 

30 June

2018

 

30 June

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Salaries and consultancy fees

497

 

513

Other benefits

130

 

127

 

627

 

640

 

 

 

10      Borrowings

 

 

30 June

2018

 

31 December

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

Secured

 

 

 

Borrowings

310,694

 

311,578

Less: non-current borrowings

(128,138)

 

(127,799)

Current borrowings

182,556

 

183,779

 

The table below analyses the borrowings into relevant maturity groupings based on the remaining period as at the condensed interim consolidated statement of financial position date to the contractual maturity date.

 

 

30 June

 2018

 

31 December 2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

Due:

 

 

 

6 months or less

178,994

 

182,016

6 - 12 months

3,562

 

1,763

1 - 2 years

8,705

 

9,346

2 - 5 years

31,056

 

25,959

More than 5 years

88,377

 

92,494

 

310,694

 

311,578

 

The annual interest rate on loans is as following:

 

30 June

 2018

 

31 December 2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

Kuwaiti Dinar with an annual interest rate

5.00%

 

4,75%

Bahraini Dinar with an annual interest rate

5.37%

 

5.25%

United States Dollar with an annual interest rate

6.53%

 

5.95%

Australian Dollar with an annual interest rate

4.85%

 

3.64%

Arab Emirates Dirham with an annual interest rate

6.38%

 

5.68%

 

Bank facilities are secured by Hotel Properties, Group's corporate guarantees and letter of undertakings. There is no material variance between the carrying value of loans and their fair value.

The current borrowings in local currency is as follows:

 

Local

30 June

2018

31 December 2017

30 June

2018

 

31 December 2017

Currency

Local Currency '000

In USD '000

 

 

 

 

 

 

US Dollar (USD)

22,809

23,336

22,809

 

23,336

Bahraini Dinar (BHD)

11,350

11,950

29,977

 

31,700

Kuwait Dinar (KWD)

150

100

495

 

331

Australian Dollar (AUD)

171,179

162,675

126,792

 

126,981

UAE Dirhams (AED)

9,120

5,250

2,483

 

1,431

 

 

 

182,556

 

183,779

 

The non-current borrowings in local currency is as follows:

 

Local

30 June

2018

31 December 2017

30 June

2018

31 December 2017

Currency

Local Currency '000

In USD '000

 

 

 

 

 

US Dollar (USD)

73,178

75,851

73,178

75,851

Kuwait Dinar (KWD)

8,250

8,350

27,223

27,663

UAE Dirhams (AED)

101,879

89,193

27,737

 

24,285

 

 

 

128,138

 

127,799

 

 

At 30 June 2018, the Group has undrawn banking facilities of USD 25,473,000 (31 December 2017: USD 38,928,000) with commercial banks. The facilities include short-term and long-term loans. Unamortised arrangement fees and other transaction costs amount to USD 4,035,000 (31 December 2017: USD 3,897,000).  

During the period, the Group did not comply with certain terms in certain loan agreements. The Group has not remedied this non-compliance during the period-end and continues to classify these loans amounting to USD 29,977,000 (2017: USD 28,517,000) as current in accordance with IAS 1, Presentation of financial statements. Up to the date of authorisation of this condensed interim consolidated financial information for issue, the Group has not received any notice for accelerated repayment of banking facilities from any of its lenders.

 

As at and the year ended 31 December 2017, the Group did not comply with certain terms of a loan agreement for entities in Australia. However, this non-compliance was remedied before the period-end date. Since, the Group is in process of entering into an agreement to re-finance this loan, therefore, in accordance with IAS 1, Presentation of financial statements, the Group has reclassified these loans, amounting to USD 125,374,000 as current.

 

 

11      Share capital and share premium account

 

 

Number of

 

USD'000

Share capital

shares

 

 

 

 

 

 

At 1 January 2017 (Audited)

147,637,195

 

24,102

At 31 December 2017 (Audited)

147,637,195

 

24,102

At 30 June 2018 (Unaudited)

147,637,195

 

24,102

 

 

USD'000

Share premium

 

At 1 January 2017 (Audited)

24,479

At 31 December 2017 (Audited)

24,479

At 30 June 2018 (Unaudited)

24,479

The authorised share capital of the Company is GBP 40 million divided into 400 million shares of 10 pence each. They entitle holders to participate in dividends and to share proceeds of winding up of the Company in proportion to the number and of amounts paid on the shares held.

 

On 23 December 2013, the Company issued 47,637,195 new ordinary shares at GBP 0.64 as part of its listing on the AIM division of the London Stock Exchange.

 

 

 

12                         Other reserves

 

 

Statutory reserve

 

Voluntary reserve

 

Foreign currency translation reserve

 

Share-based payment reserve

 

Merger reserve

 

Total

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017 (Audited)

4,507

 

2,907

 

(12,010)

 

828

 

(5,649)

 

(9,417)

Transfers to reserves

-

 

-

 

-

 

4

 

-

 

4

Total comprehensive income for the year

-

 

-

 

5,474

 

-

 

-

 

5,474

At 31 December 2017 (Audited)

4,507

 

2,907

 

(5,536)

 

832

 

(5,649)

 

(3,939)

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2018 (Audited)

4,507

 

2,907

 

(6,536)

 

832

 

(5,649)

 

(3,939)

Total comprehensive loss for the period

-

 

-

 

(4,987)

 

-

 

-

 

(4,987)

At 30 June 2018 (Unaudited)

4,507

 

2,907

 

 

(11,523)

 

832

 

(5,649)

 

 

(8,926)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13    Fair value measurements of non-current assets

 

The change in fair value measurements of hotels in operation for the six-month period ended 30 June 2018 is considered by the management to be immaterial. The change in fair value of investment property is seen Note 7.

 

The Directors' believe that these valuations, on the basis of current use, represent the highest and best use of the respective assets. The valuation technique has remained unchanged from 31 December 2017 and the Directors of the Group review the valuation process undertaken and consider whether it remains appropriate.

 

 

 

 

The Group uses the following hierarchy for determining the fair value of assets and liabilities held at fair value by valuation technique:

 

-          Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: other techniques for which all inputs which have significant effect on the recorded fair value are observable, either directly or indirectly; and

Level 3: techniques which use inputs which have significant effect on the recorded fair value that are not based on observable market data.

 

The fair value measurements of property and equipment and investment properties are classified as Level 3 in the fair value hierarchy in their entirety, due to the fact that significant unobservable inputs are used in arriving at an appropriate fair value.

The fair value measurement is sensitive to changes in unobservable inputs. The discount and yield rates used to establish a net present value for each separately valued property are as follows and if changed, could result in a materially different fair value.

 

 

At 30 June

2018

 

At 31 December

2017

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Discount rate: owned asset

7.8%-11.5%

 

7.8%-11.5%

Exit yield

6.3% - 15.0%

 

6.3% - 15.0%

 

The future forecast results represent an unobservable input for each property. Each separate property valuation is directly dependent on the forecast results and hence a significant/ sustained decrease in expected future results would result in a similar proportional reduction in the fair value of the property. Since there is no significant change in discount rate and exit yield, the fair value of property and equipment remains as is as at 31 December 2017.

 

Fair value of investment property

 

At 30 June

2018

 

At 31 December

2017

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Discount rate: owned asset

11%

 

10%

RevPAR (in USD)

55- 95

 

71- 98

 

 

 

 

14    Commitments

 

At 30 June 2018, the Group had entered into contractual commitments for hotels under construction amounting to USD 34,398,000 (31 December 2017: USD 43,757,000).

 

15      Lease arrangements

(a)       Operating lease arrangements

The Group leases land, building and office space under various operating lease agreements. The remaining lease terms of the majority of the leases are between one to twenty years and are renewable at mutually agreed terms.

 

 

30 June

2018

 

30 June

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Lease payments under operating leases recognised as an expense during the period

2,069

 

1,366

 

At the condensed interim consolidated statement of financial position date, the future minimum lease payments payable under operating leases are as follows:

 

 

30 June

2018

 

31 December

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

Within one year

4,611

 

4,674

Between two and five years

17,355

 

17,550

After 5 years

72,208

 

74,688

 

94,174

 

96,912

 

(b)       Finance lease arrangements

 

During 2016, the Group entered into a finance lease for a property in the Kingdom of Saudi Arabia for a period of twenty years. Management has determined that this lease should be accounted for as finance lease. Accordingly, the Group recognised a finance lease asset and a

liability amounting to USD 9,330,000 in 2016. At the condensed interim consolidated statement of financial position date, the commitments in relation to finance leases are payable as follows:

 

 

30 June

2018

 

31 December

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

Within one year

644

 

610

Between two and five years

2,813

 

2,778

After 5 years

11,339

 

11,712

Minimum lease payments

14,796

 

15,100

Future finance charges

(6,265)

 

(6,147)

 

8,531

 

8,953

The present value of finance lease liabilities is as follows:

 

           

30 June

2018

 

31 December

2017

 

USD'000

 

USD'000

 

(Unaudited)

 

(Audited)

 

 

 

 

Within one year

533

 

518

Between two and five years

2,059

 

2,085

After 5 years

5,939

 

6,350

 

7,998

 

8,435

 

8,531

 

8,953

 

16    Seasonality of operations

Due to the seasonal nature of the hospitality business, higher revenues and operating profits are usually expected in the second half of the year than the first six months.

 

 

17    Events after reporting period

 

On 24 September 2018, the Board of Action Hotels announced that, at the Court Meeting and the General Meeting held on the same day, in connection with the recommended acquisition by Action Real Estate Co KSCC ("Action Real Estate") of the entire issued and to be issued ordinary share capital of Action Hotels, to be effected by way of a scheme of arrangement under Article 125 of the Jersey Companies Law (the "Scheme"), all of the resolutions proposed were duly passed.

 

At the Court Meeting, a majority in number of Scheme Shareholders, who voted (either in to person or by proxy) and who together represented over 3/4th of the voting rights of Scheme Shareholders who are on the Company's register of members at the Voting Record Time, voted in favour of the resolution to approve the Scheme. The resolution was accordingly passed.

 

At the General Meeting, the requisite majority of Action Hotels Shareholders voted (either in to person or by proxy) to pass the Special Resolutions in connection with:

i)          amending the Articles to give authority to the directors to take all such actions as may be necessary to implement the  Scheme; and

ii)         the de-listing of the Action Hotels Shares from the AIM Market.

 

 


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 [email protected] or visit www.rns.com.
 
END
 
 
IR KDLFLVKFFBBB

a d v e r t i s e m e n t