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Action Hotels PLC makes encouraging start to 2018

The company is to make its dividend policy less generous to free up funds to grow the business faster
the Mercure Riyadh Hotel
The Mercure Riyadh Hotel is expected to open in 2019

Action Hotels PLC (LON:AHCG) said trading for the first two months of 2018 was encouraging, with like-for-like revenues well ahead of 2017.

Excluding the recently opened ibis Styles Bahrain hotel, revenues this year have been 6.4% ahead of 2017 on a like-for-like basis, while trading at the recently opened hotels in Sohar Oman and Brisbane Australia are showing revenue growth year-on-year and good customer feedback as they mature into their relative markets, Action Hotels said.

READ: Action Hotels trading “on track with current expectations”

The ibis Styles Bahrain, which opened in August 2017, is also showing a promising start to trading and the two hotels in Kuwait continue to perform well and combined are 12% ahead of last year revenue.

The improvement in trading has been achieved despite an unhelpful economic climate in the Middle East that is putting pressure on room rates.

In view of this, the board has elected to proceed with only one of the two hotel openings it had lined up; the Mercure Riyadh Hotel is expected to open in 2019 but the previously planned leasehold hotel, the Tulip inn Jeddah, has been removed from the development pipeline, saving anticipated capital costs of around US$6.4mln in the process.

Ass for trading in the year just ended, the board expects results will be broadly in line with market expectations, with revenue of around US$58.3mln and adjusted underlying earnings (Ebitda) of around US$15.2mln.

The loss before tax will be deeper than expected at around US$12.2mln, mainly due to the company not being to capitalise some of the interest costs last year as there were delays in two hotel openings, early repayment fees and a higher than forecast depreciation charge as valuations have increased.

While valuations have yet to be finalised Action Hotels expects an increase in the net asset value for the year compared to that reported for 2016 of US$195mln.

The board also advised shareholders that it has reconsidered its dividend policy and believes that the company’s funds would be best served, in the main, in investing to grow the business, as a result of which future dividends will be significantly reduced.

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