Safestay : Interim Results to 30th June 2021

The information contained within this announcement is deemed by the Group to constitute inside

information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR")

28 September 2021

Safestay plc

("Safestay", the "Company" or the "Group")

Interim Results

Safestay (AIM: SSTY), the owner and operator of an international brand of contemporary hostels, is

pleased to announce its Interim Results for the 6 months to 30 June 2021.

H1 Trading

• Safestay operates 16 hostels with approximately 3,218 beds across 11 European and 3 UK cities
• Due to the COVID-19 pandemic, government enforced trading restrictions meant the hostels were closed for 83% of H1 2021, with reopening commencing from late May. As a result, occupancy was at 19% (based only on hostels while they were open)
• Total revenues were £1.02 million
• Recorded EBITDAR loss of £0.3 million and a profit before tax of £3.6 million, which was driven by exceptional items relating to the gain on disposal of Edinburgh
• Management actions reduced the monthly running costs of the business to £0.35 million, down over 60% from pre-COVID-19 levels
• As at 30 June 2021, net asset value per share was 50.1p per share (2020: 48.2p per share)
• To ensure the business was able to re-start with a strong financial base, 2 hostels were sold to raise £16.8 million:
• • Leasehold in the Barcelona Sea hostel sold on 26 February 2021 for £0.8 million
  • Completed sale of the 150-year lease interest in the Edinburgh hostel on 30 June 2021 for £16.0 million

Post half-year

• In July, following the sale of Edinburgh, bank debt was reduced by 35% to £18m, and the Group had cash balances of £6.3m to support the transition back to being fully operational, with a current balance of £5.5m as at 20 September, despite capital investment to support reopening
• Re-openingof the hostels began in May and by 31 July all 16 hostels were trading, achieving occupancy from primarily domestic customers in July and August of 38% and 43% respectively
• As at the end of August, £1.5m of advanced bookings are held, which includes a pickup in international travel associated with the expected return of major tourist events

Larry Lipman, Chairman of the Company, commenting on the results said:

"Trading in this period was extremely limited with our hostels closed for 83% of the six months. Our focus was therefore on maintaining a low-cost base, preparing for when trading restrictions could be lifted and securing our financial position to ensure the business can invest behind the return to a normal trading environment. We have delivered on all three of these objectives and while it is early days, all 16 hostels are trading with occupancy across the portfolio showing month on month improvement. Group bookings from colleges and schools are starting to return for the winter period and summer 2022 showing the fundamental appeal of our premium hostels remains unchanged and when our market does normalise, we will have a great opportunity to grow market share. As we relaunch the business post covid, we recently announced to undertake a strategic review in order to maximise value for all shareholders. This process will reveal whether there is additional value for shareholders compared to the upside we believe we can deliver."

Enquiries
Safestay plc	[phone]
Larry Lipman
Liberum Capital Limited
(Nominated Adviser and Broker)	[phone]
Andrew Godber/Edward Thomas
Novella	[phone]
Tim Robertson
Fergus Young

For more information visit our:

Websitewww.safestay.com

Vox Markets pagehttps://www.voxmarkets.co.uk/company/SSTY/news/

Instagram pagewww.instagram.com/safestayhostels/

Chairman's Statement

Introduction

With the enforced government trading restrictions due to COVID-19 leading to all 16 hostels being closed for 83% of the period under review, our focus naturally switched to protecting and preparing the business for when trading could recommence. To protect the business in this extraordinary environment we sold two hostels for a combined value of £16.8 million which facilitated a 35% reduction in Group borrowings as well as providing the cash to support the hostels re-engage as restrictions lifted. In May, a phased process of re-opening the portfolio commenced and by 31 July all hostels were open, with demand being primarily domestic albeit with increased levels of bookings direct to the Company's website. Future bookings from Groups (who represent 40% of revenues) are coming through which demonstrates the ongoing appeal of the portfolio and if, the pandemic remains in check, the business will recover and could well thrive in a less competitive market as a high number of smaller or independent operators have ceased trading.

Financial review

Reflecting the severe government-imposed restrictions on trading, the Group generated revenues of £1.02 million (2020: £3.4 million), leading to an EBITDAR loss of £0.3 million (2020: £ 1.2 million).

Where available the Company took advantage of government reliefs, the majority of staff were furloughed and support in the form of grants was received in varying amounts from the governments of each country where the Company operates. The Company has maintained the reductions in monthly running costs, compared to pre-covid levels by 60% to an average of £0.35 million while non trading restrictions have been in place. Contributing to the cost reductions, the Group's landlords have generally sought to be supportive with £0.8m rent forgiveness in H1. This was further helped by Directors and management agreeing to reduce salaries by 40%.

As a result, and with the benefit of the exceptional profit of £7.64m from the disposal of Edinburgh, the Group restricted the financial impact of the pandemic in the period to a profit before tax of £3.6 million (2020: loss before tax of £4.7 million). Government support of £636k was received in the period (£300k payroll grant income reported in admin expenses and £336k other grant income reported in exceptional items), leading to a profit per share of 5.5p (2020: -7.3p per share).

During the period, the Company sold the leasehold Barcelona Sea hostel for £0.8 million and completed the sale of the 150-year lease interest in the Edinburgh hostel for £16.0 million. Post period, from the proceeds, borrowings were reduced by 35% to £18 million and as at 6th July the Company had cash of £6.3 million.

As at 30 June 2021, net asset value per share was 50.1p per share (2020: 48.2p per share).

Operational review

Brussels, York and Elephant & Castle were the first hostels to be reopened on 17 May. The process was phased to help the management team oversee re-openings and ensure that all safety protocols were reintroduced to protect customers and staff alike as well as comply with local regulations. The order of hotels openings was dictated by booking levels and local regulation requirements and where the Company operates more than one hostel in a city, bookings have been consolidated into one hostel. By 31 July all hostels had reopened.

To support re-engagement, room rates over the summer have included breakfast to attract customers and improve cashflow whereas normally breakfast would be an additional cost. As has been widely reported across the hospitality sector, labour costs have increased with competition for good staff leading to higher payroll costs but it is still too early to determine the overall impact. Bookings have been largely domestic with the reluctance to fly helping our regional locations but as the summer progressed more international travel was taking place and the Company experienced an increase in higher margin bookings direct to the website representing 25% of total bookings.

Overall, the business has made a reasonable return to trading, placing the safety of guests first and looking to build momentum and trust in the business over the coming months. The core offer of a comfortable and safe stay in beautiful, often iconic buildings that are centrally located, in well-known and popular cities but still with a bed rate of around just £20, is unchanged. Enquiries and firm bookings for 2022 show that this offer remains appealing, and the management objective is therefore simply to focus on a steady return to pre-Covid-19 levels. The main concern being that the pandemic remains in check and there is no return to lockdown.

Historically, Safestay have sought to operate with an efficient cost base necessary to service customers and give them the best experience, and the action taken through lockdown to mitigate those costs, has provided the business through re-opening the opportunity to re-introduce cost back in to support revenues on a measured basis, whilst continuing to look for further operating efficiencies. One such example included exploring the opportunity to introduce a new property management system, that was both better tailored to Safestay's operating model and significantly more cost efficient, the result of which, Front Desk Manager has been successfully implemented through the third quarter.

Post re-opening occupancy levels have been climbing month on month, with occupancy levels for August 2021, increasing to 43%, with evidence that the re-introduction of some events (Pisa and London) selling out of beds on some nights.

The wide geographical spread of our hostels across Europe provides customers an unrivalled platform for travel, but the mixed approach adopted by each country to unlock and start to relax travel restrictions, has temporarily changed non-group customer behaviours to become more erratic, with would-be travellers remaining "in-country" avoiding international travel, and shifting more towards last minute bookings.

As we head towards winter the uncertainty around potential future Covid actions makes it impossible to really know when the leisure and hospitality sector and international travel will really get back to normal, but management are targeting get back to pre-Covid run rates through the middle quarters of 2022. As is standard practice, when restructuring the debt off the back of the sale of Edinburgh, in April 2021 management prepared cash forecasts to the end of 2022, which 5 months on are proving to be accurate as the hostels recover their business. On that basis Safestay believe occupancy levels in the forty's percentile will be maintained in the early part of H2 2021 before seasonality comes into play, meaning 2021 occupancy totals for hostels, whilst open for business will be mid 30's percent, reflecting both the exit to 2021 and run into 2022 anticipated.

Outlook

It is pleasing to be trading again and to see demand steadily increase. Currently, the business is operating at around 50% of pre-Covid-19 occupancy levels in 2019 and room rate is at approximately 75%. This is within our business plan, and we believe ahead of many of our peers. We will continue to offer attractive

room rates while occupancy builds. Financially, the business is on a sound footing following the sale of two hostels, with cash reserves as at 20 September of £5.5 million providing the flexibility to support the business and take advantage of investment opportunities should they arise. As we relaunch the business post covid, we recently announced to undertake a strategic review in order to maximise value for all shareholders.

Larry Lipman

Chairman

28 September 2021