PPHE Hotel Group Annual Report 2015 PPHE Hotel Group Annual Report 2015 Annual DELIVERING SOLID GROWTH Annual Report 2015 WHO WE ARE We are an international hospitality company, with a strong asset base and ownership of, and access to, the world-class Park Plaza® and art’otel® brands. WHAT WE DO Our vision is to realise our growth potential and our primary objective is to create and realise shareholder value by becoming one of the leading hospitality companies in the upper upscale and lifestyle hotel segments. HOW WE DO IT Our portfolio of owned, managed, leased and franchised hotels in operation comprises 38 hotels, offering a total of over 8,300 guest rooms. Our development pipeline includes five new hotel projects and one hotel extension. Our key markets are the United Kingdom, The Netherlands, Germany and Croatia. Front cover image: 5&33 at art’otel amsterdam. FINANCIAL HIGHLIGHTS €302.5m 20p +11.8% total revenue +5.3% dividend per share1 €122.4m €110.9m +16.4% EBITDAR +16.9% EBITDA €38.8m €41.2m (6.8)% profit before tax +25.5% normalised profit before tax2 €0.97 €0.99 (2.9)% reported earnings per share +25.6% normalised earnings per share2 36.6% €127.3 +150bps EBITDA margin3 +12.1% REVPAR4 84.3% €150.9 +60bps occupancy +11.3% average room rate BUSINESS HIGHLIGHTS Construction of new hotels Opened new restaurants and bars significantly progressed in Nottingham and Amsterdam 1,067 new rooms expected to open OAKS Restaurant & Bar opened in in 2016 as part of three new hotels and Nottingham in summer and Amsterdam’s one extension and reconfiguration first espressamente illy in autumn Opened Park Plaza Signed hotel management agreement Arena Pula, Croatia for new art’otel in London Opened the fully refurbished Park The prestigious new art’otel london Plaza Arena Pula, with 175 rooms battersea power station is and leisure facilities planned to open in 2019 Delivered record service levels Post balance sheet event Achieved record service performance Entered into a sale and purchase score, as rated by our guests, agreement to acquire all shares in the of 8.63 on a scale of 1–10 company that holds a majority share in Arenaturist in Croatia See CFO statement for further details and other post balance sheet events 1 Including an interim dividend of 10p and a proposed final dividend of 10p per share. 2 See page 30. 3 EBITDA divided by total revenue. 4 Revenue per available room. Annual Report and Accounts 2015 1 4 10 Chairman’s statement President & Chief Executive Officer’s statement STRATEGIC REPORT GOVERNANCE 14 Chairman’s statement 256 Board of Directors 6 Our portfolio 58 Corporate governance statement 8 Our brands 63 Report of the Audit Committee 10 President & Chief Executive Officer’s statement 65 Report of the Remuneration Committee 14 Our business model and strategy 67 Directors’ report 16 Our business model in action 22 Our Strategy at a glance 24 Key performance indicators 26 Principal risks and uncertainties 28 Deputy Chief Executive Officer & Chief Financial Officer’s statement 36 Review of the year 48 Corporate Social Responsibility 2 PPHE Hotel Group 16 28 Our business model Deputy Chief in action Executive Officer & Chief Financial Officer’s statement 36 48 Review of the year Corporate Social Responsibility FINANCIAL STATEMENTS APPENDICES 371 Independent auditors’ report 4121 Consolidated statement of financial 72 Consolidated statement of financial position position (in GBP) 73 Consolidated income statement 122 Consolidated income statement (in GBP) 74 Consolidated statement of comprehensive income 123 Consolidated cash flow statement (in GBP) 75 Consolidated statement of changes in equity 125 Subsidaries included in the Group 76 Consolidated statement of cash flows 126 Jointly controlled entities and associates 78 Notes to Consolidated financial statements 127 Glossary 129 Current and committed projects 130 Contacts Annual Report and Accounts 2015 3 1 STRATEGIC REPORT – CHAIRMAN’S STATEMENT WE ARE ON THE VERGE OF SIGNIFICANT EXPANSION IN LONDON 4 PPHE Hotel Group 48 Corporate Social Responsibility 56 Introduction to Governance 58 Board of Directors ELI PAPOUCHADO CHAIRMAN ear shareholders, The Board is proposing the payment of a final D 2015 was another great year for our dividend of 10.0 pence per share, which when Group with many successes and combined with the increased interim dividend highlights and we are on the verge of of 10.0 pence per share paid on 8 October substantial expansion in London. 2015, amounts to a total dividend for the year ended 31 December 2015 of 20.0 pence per Our vision of realising growth has never share, an increase of 5.3% compared with 2014. been more evident in the history of our The increased dividend reflects the Board’s Group. Throughout the past decade we have confidence in the strength of PPHE Hotel gone from strength to strength and 2016 will Group. The Board expects to continue to see us take a significant leap in the Group’s follow a progressive dividend policy. development with three new hotel openings planned, all of which are wholly owned, and a Whilst the Board continues to be mindful major extension of one of our London hotels. of the uncertainties the European travel As a result, the number of rooms in our industry faces, we are focusing on the delivery portfolio will grow by approximately 13% of our new hotel projects in Germany and in 2016. the United Kingdom and the extensive renovations planned across all of our operating As we prepare for these openings, our teams regions. Not only will our improved and newly have also laid the foundations for the imminent developed hotels further strengthen our renovation programme for several of our key footprint in key European markets, our scale hotels in London, Berlin and Amsterdam which and increased brand recognition will also are expected to commence in 2016. result in long-term benefits. In addition, we extended our longer-term The Board is keen to take advantage of development pipeline with the signing favourable capital market conditions to procure of a hotel management agreement for what long-term debt and continues to evaluate promises to be a magnificent art’otel, which such opportunities. is to be developed as part of the Battersea Power Station project, Europe’s largest I would like to thank the members of the Board privately funded urban regeneration project. for their guidance and our team members for their hard work and commitment during 2015. With economic uncertainty in some I would like to particularly thank Elisha Flax, markets around the world, political instability, who will be stepping down as Non-Executive elections in two of our four operating regions, Director at the Company’s next Annual the refugee crisis affecting Europe and various General Meeting. Elisha has been a Director of acts of terrorism, 2015 was a difficult year for the the Company for over eight years and I would travel sector. like to thank him for his contribution and wish Against this backdrop, and with our teams him the best for the future. The Board will be focusing on our future growth and planned proposing the appointment of Dawn Morgan, product improvements, I am pleased to report a former Finance Director of International that our hotels in operation have collectively Energy Group, as Non-Executive Director of delivered record revenue and operating the Company at the next Annual General profit in 2015. Meeting. I look forward to what is expected to be an exciting and memorable year for Our performance was in line with the Company’s our Group. upgraded expectations during the year and, on behalf of the Board, I would like to extend my ELI PAPOUCHADO sincere appreciation to all our team members CHAIRMAN who have delivered such great results. Annual Report and Accounts 2015 5 1 STRATEGIC REPORT – OUR PORTFOLIO A DYNAMIC HOSPITALITY COMPANY We are one of Europe’s few remaining owner/ operator companies, with a strong asset base and access to world-class brands and global distribution. Our balanced approach means that we fully understand owners’ needs and the power that global brands bring. CORE MARKETS UNITED KINGDOM CROATIA 2,791 rooms in operation 2,814 rooms in operation 1,402 rooms in development 1,545 rooms have been redeveloped between 2012 and 2015 London is our primary market and greatest Through our management agreement for and part revenue contributor. Throughout the years, ownership of Arenaturist we are one of the leading London has proved to be one of world’s most hospitality companies in this emerging tourism resilient markets. We are on the verge of destination on the Adriatic coast known for its significantly expanding our London footprint, pristine nature, great food and easy access from most with Park Plaza set to become one of the of Europe. In the past four years, we have significantly 36 Review of the year largest upper upscale hotel brands in the capital. redeveloped the portfolio, which now offers several Our portfolio also includes hotels in Cardiff, contemporary Park Plaza hotels, providing all facilities Leeds and Nottingham. and services today’s holiday makers expect. T H E GERMANY NETHERLANDS AND HUNGARY 1,117 rooms in operation 1,423 rooms in operation 177 rooms in development With four hotels in Amsterdam, we are well We operate five hotels in Berlin, of which three are represented in the thriving Dutch capital and we Park Plaza branded and two carry the art’otel brand. have a good mix when it comes to hotel locations The hotels are well spread around the city, with and product positioning. Two of our hotels in our flagship hotels located in Berlin’s Mitte area.